The combined producer and import price index was unchanged on the month in June. The flat reading, which was softer than the market consensus, trimmed the annual inflation rate by 0.3 percentage points to minus 0.6 percent, its fifth straight decline and its weakest print since February 2021.

Domestic producer prices were also steady at their May level, reducing their yearly rate from 2.0 percent to 1.7 percent. Import prices edged a tick firmer but this still cut their annual change from minus 4.6 percent to minus 5.0 percent, the lowest outturn since November 2020.

Within the PPI, monthly changes were generally around zero, the main exceptions being timber products (4.1 percent) and water treatment and distribution, waste collection, recovery (minus 4.6 percent). Import prices were boosted by a 14.5 percent bounce in mining and quarrying products. As a result, the underlying composite index dipped 0.1 percent on the month, reducing the annual core inflation rate from 1.8 percent to 1.5 percent, its lowest outturn since July 2021.

Today's update provides further evidence of softening pipeline inflation pressures although this still may not be enough to prevent the SNB tightening again in September. In any event, the June update puts the Swiss ECDI at minus 19 and the ECDI-P at minus 13 and so extends the unbroken period of underperformance that began back in late March.

Prices are seen rising 0.2 [percent on the month after a 0.3 percent drop in May.

The producer price and import price index focuses on the actual prices of products on the market (transaction price) at the time of the order. The prices of domestic products are taken at the producer or factory level, excluding value added tax and consumption taxes. For imports, prices are collected at the Swiss border, without the value added tax, taxes on consumption and tariffs. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer

The producer price and import price index measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. Producer and import prices are more volatile than consumer prices. While the CPI is the price index with the most impact in setting interest rates, the producer price and import price index provides significant information earlier in the production process. The producer price and import price index is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace. The bond market rallies when the producer price and import price index decreases or posts only small increases, but bond prices fall when the index posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.