(Bloomberg) -- US producer prices barely rose in June from a year earlier, another sign of cooler inflation that will likely comfort Federal Reserve officials.

The producer price index for final demand rose 0.1% from a year earlier, the smallest advance since 2020, according to data out Thursday from the Bureau of Labor Statistics. On a monthly basis, the PPI also increased 0.1% after falling in the prior month.

Normalizing global supply chains, stabilizing commodity prices, and a broader shift in consumer demand toward services and away from goods have generally helped alleviate inflationary pressures at the producer level.

A separate report Thursday showed a less-than-expected 237,000 people filed applications for state unemployment benefits last week, suggesting a resilient job market.

Read More: US Jobless Claims Dip to 237,000 as Labor Market Stays Resilient

Services costs edged higher despite a sharp decline in transportation and warehousing costs. Prices for deposit services, travel and accommodation and airline passenger services also moved up.

Prices of goods, meanwhile, were little changed. That’s flowed through to consumers in the form of lower prices — something known as deflation. Goods costs fell 4.4% from a year ago, the biggest decline in more than three years. Food prices dropped for a third month.

Excluding the volatile food and energy components, the so-called core PPI also barely rose from May and was up 2.4% from a year ago. The annual gain was the smallest since January 2021.

Consumer Prices

The figures come just a day after separate data showed consumer prices rose in June at the slowest pace since 2021. While a July interest-rate hike is all but assured, the rapid descent in price growth — now just a third of its 2022 peak rate — offered fresh hope that the Fed can soon wrap up the most aggressive tightening campaign in decades.

Several categories from the PPI report, notably in health care, are used to calculate the personal consumption expenditures price gauge — the Fed’s preferred inflation measure — that will be released later this month. Within health care, several categories were little changed from the prior month. Still, hospital inpatient care costs accelerated while prices of nursing home care declined.

What Bloomberg Economics Says...

“The June PPI reading supports the case for only more Fed rate hike. A jump in financial services and insurance pushed up supercore PCE inflation a notch, but the Fed is likely to look past this increase given the volatility in that sector.”

— Jonathan Church, economist

For the full note, click here

Producer prices excluding food, energy, and trade services — which strips out the most volatile components of the index — rose 2.6% from a year ago, the smallest gain since February 2021.

Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, slumped 9.4% from June 2022, the sharpest drop since 2009. Excluding food and energy, these costs also fell.

--With assistance from Chris Middleton.

(Adds Bloomberg Economics comment)

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