The U.S. Labor Department has released its Producer Price Index (PPI) for the month of June. This is still the relatively new calculation using “final demand,” but it may cause a drop in all the deflationary worries. As a reminder, PPI is the measurement of wholesale inflation, and the price pressures in PPI are generally believed to appear at the consumer level two or three months out, if the trends remain in place.

PPI came out at a gain of 0.4% in June. This is 0.1% higher than the 0.3% expected by Bloomberg and was double the 0.2% expected by Dow Jones.

The core PPI, which excludes food and energy, came in up 0.3% on a seasonally adjusted basis. Bloomberg and Dow Jones both had a 0.1% expectation for the core PPI.

May was left unrevised at 0.5% on the headline PPI, and the core PPI in May was left at 0.1%.

The big question is whether two months in a row, after all the deflationary pressure woes in the past year, makes a trend that may remain in place. Unfortunately, oil prices have dropped handily in July, and that may reverse some of the pressure in the next month or two if things remain static.

Where this gets complicated is on the year-over-year measures. June producer prices were down by 0.7% from June of 2014 on the headline PPI. The other side of the coin is a 0.8% gain in the core PPI on an ex-food and energy basis.

This is just one of those reports that looks better on the inflation front, if you are cheering for the Federal Reserve to begin raising interest rates in the weeks and months ahead. At least that is the case in near-term reports if you back out the year-over-year data.

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