US producer prices picked up in July, primarily due to increases in certain service categories, underscoring the choppy nature of getting inflation back down to target.

Several categories from the producer price index (PPI) report, notably in health care are used to calculate the personal consumption expenditures price gauge that will be released later this month. The PPI for final demand, as well as the core index which excludes food and energy, both rose by 0.3 per cent in July, according to the Bureau of Labor Statistics (BLS).

While those came in slightly more than forecast, downward revisions to the prior month, tempered some of the strength. “The underlying trends show that PPI inflation is reverting to its pre-pandemic run rate, though progress is likely to be slower” in the second half of the year compared to the first half, declared Matthew Martin and Oren Klachkin of Oxford Economics in an investors’ note.

The prices of goods rose slightly, boosted by the biggest increase in food costs since November. Core goods prices, excluding food and energy, were flat after a decline in June.

Weaker goods prices in recent months have flowed through to consumers in the form of lower prices — something known as deflation. The data come on the heels of fresh inflation data out yesterday showing a key measure of consumer prices, excluding food and energy, posted the smallest back-to-back monthly gains in more than two years.

This will likely keep the US central bank from raising interest rates at its September meeting. Martin and Klachkin noted, “while these data will comfort Fed officials, policymakers will likely maintain a hawkish tone and keep a close eye on whether last month’s jump in services prices persists in the months ahead.”