Washington (AFP) — U.S. producer prices edged higher in July, with gains slowing sharply from the prior month, official data released Friday showed.

The Labor Department said its producer price index rose 0.1 percent in July, after a 0.4 percent increase in June.

Rises in services prices, primarily in transportation and warehousing, accounted for the PPI increase, while goods prices were unchanged, the department said.

Analysts on average had forecast a 0.2 percent increase.

Excluding food and energy prices, the PPI rose 0.2 percent in July, matching estimates.

Food prices rose 0.4 percent while energy prices declined 0.6 percent, including a hefty 2.1 percent fall in gasoline prices.

The year-over-year increase in producer prices fell for a third straight month, to 1.7 percent.

The report showed tepid inflationary pressures as the U.S. economy continues to grow at a modest pace.

“Pipeline pressures from core materials prices remain very muted, so the only threat here comes from companies seeking to offset feared/actual higher labor costs by lifting prices,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a client note.

The Federal Reserve, with a dual mandate of price stability and maximum employment, has said inflation remains below its 2.0 percent target over the long run.

The Fed’s preferred inflation measure, the personal consumption expenditures price index, slowed to an annualized 1.6 percent rate in June from 1.8 percent in May.

AFP Photo/Bill Pugliano

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