Businesses’ costs in America are not rising as fast as they have been in recent months, an indication that price hikes could slow for consumers in the months ahead.

The United States Producer Price Index (PPI), which tracks prices changes for producers and manufacturers, increased 4.7% in the 12 months that ended in July. That was a slowdown from 5.5% in June, according to the U.S. Bureau of Labor Statistics data released yesterday.

On a monthly basis, prices were unchanged after falling 0.1% in June. Both measures were better than economists expected. The PPI, a closely watched measure of wholesale inflation, serves as a potential bellwether for what consumers could experience in the near future; however, the higher prices businesses pay each other are not always fully passed on through the supply chain.

Wholesale inflation cooling off

Wholesale inflation is cooling off after the war in Iran caused a spike in oil and gas prices and other commodities. Producer-level inflation climbed to a four-year high of 5.9% in May before falling energy prices cooled things off a bit in June and July. Wholesale food prices also declined for the second month in a row.

However, since oil and gas prices can vary widely on a monthly basis and are subject to more on-time shocks – especially in the wake of a war – economists closely watch “core” inflation gauges that remove volatile components. Core PPI, which excludes food and energy prices, rose 0.2% in July and slowed to 4.2%, the lowest rate in four months.

On Wednesday, the July Consumer Price Index showed that inflation of commonly purchased goods and services cooled for the second month in a row to an annual rate of 3.4%. Prices are still rising much faster than they typically do.

This has been the case for more than five years now, and that’s had a compounding, negative effect on household finances and affordability. The latest PPI report may portend slower inflation to end the summer, but fuel prices remain a wild card because of the ongoing Iran conflict.