US producer prices unchanged in July

WASHINGTON, Aug 13 (Reuters) - U.S. producer prices were unchanged in July as goods prices declined, though a rise in the cost of services suggested inflation could remain elevated.

The flat reading in the Producer Price Index for final demand last month followed a revised 0.1% drop in June, the Labor Department's Bureau of Labor Statistics said on Thursday.

Economists polled by Reuters had forecast the PPI rebounding 0.2% following a previously reported 0.3% decline in June. The cost of services increased 0.2% while producer goods prices fell 0.7%. Most of the data are collected early in the month, meaning that sharp oil price increases toward the end of July were probably not reflected in the PPI.

In the 12 months through July, the PPI increased 4.7% after advancing 5.5% in June. The Federal Reserve tracks the Personal Consumption Expenditures price indexes for its 2% inflation target. Following unexpected job losses in July and mild consumer inflation readings, the PPI report added to the case for the U.S. central bank to keep interest rates unchanged at the September 15-16 policy meeting.

The Fed last month left its benchmark overnight interest rate in the 3.50%-3.75% range. Prior to the PPI report, economists estimated that the PCE price index excluding the volatile food and energy components increased 0.2% in July after gaining 0.1% in June. The so-called core PCE inflation was forecast advancing 3.3% year-on-year, matching June's rise.