The U.S. Producer Price Index rose in July for a second straight month, gaining a modest 0.3%, following an unrevised estimate of a gain of 0.1% in June. Expectations for July also had been for an increase of 0.3%. The latest data suggested that overall inflation remains comparatively modest across the country, and should not dissuade the Federal Reserve from increasing its accommodative efforts in the months to come, should the central bank see the need as compelling.

The Producer Price Index gauges how much manufacturers and wholesalers pay for finished goods. Such goods, and the change in prices for them, can influence the level of inflation on the consumer side, although there is no direct correlation there. We will get the companion Consumer Price Index report for July from the Labor Department tomorrow morning.

While the overall producer price report suggested continued tame inflation at the wholesale level, there was a disquieting metric included in the report--namely the so-called core PPI number, which excludes the volatile food and energy components from the mix. That number showed an increase of 0.4% last month--twice the forecast increase of 0.2%. This is the number that the Federal Reserve looks at most closely, although one month's experience is unlikely to make a major impression on the central bank. The Fed's next FOMC meeting is on September 12th and 13th. The lead bank has already hinted that it might use that forum to introduce a third round of quantitative easing, a QE3, so to speak.

Encouragingly, energy prices dipped last month, falling by 0.4%, the fifth straight month of such a decline. However, recent trends suggest that August will break that string. On the other hand, food prices rose by 0.5% last month, with more than half of last month's food price increase accounted for by rising costs for beef and veal. Also, the sticker prices for passenger cars increased by 1.1% in July, the biggest gain in that category since June of 2009, when the nation and the car industry were just getting out of the long recession. Car sales have been quite strong and the industry is clearly playing some catch-up on the pricing side.

On the whole, the PPI report was mixed, with a fairly tame overall reading, but with some modest pressure on the core pricing front.