US producer prices believed to have edged up by 0.1 percent in July as inflation remains mild

The Labor Department reports on U.S. producer price inflation in July. The report, which measures price changes before they reach consumers, will be released Friday at 8:30 a.m. Eastern.

SMALLER INCREASE: Economists forecast that the producer price index rose just 0.1 percent in July from the previous month, according to a survey by FactSet. That would be lower than July's 0.4 percent increase, which was driven by higher gas prices.

In the 12 months ending in June, producer prices rose 1.9 percent, roughly in line with the Federal Reserve's inflation target.

TAME INFLATION: Higher food and gas costs have pushed up overall producer prices in recent months, but broader inflation trends remain mild.

Wholesale prices jumped 0.6 percent in April, pushed higher by rising food costs. Grocery prices rose this spring due to a drought California and brutal winter storms and freezing temperatures in the Midwest.

But producer prices actually fell 0.2 percent in May, as food costs also fell. Higher gas costs then pushed up costs in June. But even so, the yearly increase of 1.9 percent was down from 2.1 percent in April.

Consumer prices have tended to track the costs for producers, rising in 0.3 percent in June, mostly because of a big increase in pump prices. Consumer prices rose 2.1 percent in June compared with the year prior.

The Fed targets inflation at about 2 percent as a guard against deflation, which could drag down wages and spark another recession. At the same time, the Fed wants to avert excessive inflation and protect consumers and the purchasing power of the dollar.

Wage growth has been meager for the past four years and unemployment, now at 6.2 percent, remains elevated compared with levels typical in a healthy economy.

The choppy labor market has trimmed consumer spending, a major economic engine in the U.S., and that has made it difficult for businesses to raise prices.

Still, low inflation has enabled the Fed to pursue extraordinary measures to boost the economy. It has begun to unwind some of those measures, cutting a monthly bond-buying program to $25 billion, from $85 billion last year.

Those bond purchases had ensured low interest rates that encouraged investors to pour money into the economy.