Is there inflation or not? That is just one of the million-dollar questions out there right now? We will find out on Friday morning at 8:30 a.m. Eastern Time when the U.S. Labor Department reports the Producer Price Index (PPI) for the month of July. As a reminder, this is PPI reading now measures Final Demand.

Bloomberg estimates July’s PPI reading to come in as a gain of 0.1%. At issue is whether or not June’s hot gain of 0.4% was an anomaly or whether it was the start of something worse. We would point out that oil prices have backed off handily since the $104 and higher levels in June, and that may change the mood toward whether inflation was hot or not. in fact, in July oil prices fell $102 down to under $100 for part of the month. The last big leg down was from $100 to $96, but that was after the July period.

To keep things in perspective, May’s reading was down by -0.2%.

The more important reading is the so-called Core-PPI, which is the PPI excluding food and energy. Bloomberg is calling for a gain of only 0.1% in July once you back out the more volatile components.

As a reminder, the BLS switched to measuring the Final Demand-Intermediate Demand aggregation system from the Stage of Processing method beginning with the January PPI report (from mid-February). This still has economists, investors, and market watchers a bit confused to what each report really means.

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