WASHINGTON, Sept 12 (Askume) – U.S. producer prices rose slightly more than expected in August as the cost of services rose, but the trend was in line with low inflation.
The US Labor Department’s Bureau of Labor Statistics said on Thursday that the final demand producer price index rose 0.2% last month. July’s data was revised to show that the PPI remained unchanged rather than a modest 0.1% rise as previously reported.
Economists polled by Askume had forecast the PPI rising 0.1%.
In the 12 months through August, the PPI rose 1.7% after rising 2.1% in July. Government data on Wednesday showed consumer prices rose slightly in August , but inflation remained somewhat steady.
Easing inflation and a slowdown in the labor market have prompted the Federal Reserve to begin a policy easing cycle next Wednesday and cut interest rates by 25 basis points.
The central bank has kept its benchmark overnight rate at the current range of 5.25%-5.50% for one year and has set a target to raise it by 525 basis points in 2022 and 2023.
The reason for the increase in PPI last month was that the service industry rose by 0.4%. The service industry fell by 0.3% in July, and hotel and motel room prices rose 4.8% last month, boosting the service industry. But air ticket prices fell by 0.8%.
Business services, which measures changes in the profits of wholesalers and retailers, rose 0.6%. Consumers are protesting higher prices, limiting companies’ pricing power.
Portfolio management fees, hotel and motel stays, and air tickets are all part of the calculation of the personal consumption expenditures (PCE) price index, the inflation gauge that the Fed tracks to achieve its 2 percent target.
Commodity prices were steady last month after rising 0.6% in July. Energy prices fell 0.9%. Food prices rose 0.1%. Excluding the volatile food and energy components, commodity prices rose 0.2%, after a similar increase in July.
The narrower producer price index (PPI), which excludes food, energy and trade, rose 0.3%, the same as July’s increase. The so-called core PPI rose 3.3% from a year earlier, following a 3.2% rise in July.
