US Producer Prices Rose 0.2% in August

Marco Green
September 13, 2017

US inflation at the wholesale level rebounded toward the end of summer, but most of the increase reflected higher gasoline prices. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said he is "braced" for a temporary "spike" in producer prices because of the hurricanes. Consumer prices are expected to rise by 0.3 percent.

The producer-price index, a measure of inflation experienced by businesses, rose 0.2% in August from a month earlier, the Labor Department said Wednesday.

Economists polled by Reuters expect Thursday's data to show consumer prices rose 0.3 percent in August and 0.2 percent excluding food and energy.

The dollar index, which tracks the currency against a basket of six major rivals, was up 0.45 percent at 92.295, after rising to 92.336, its highest in a week.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent last month after being unchanged in July.

While domestic producer prices rose less than forecast, "the rebound does suggest that the USA economy retains underlying momentum", said Karl Schamotta, director of global market strategy at Cambridge Global Payments in Toronto. On a year-on-year basis, producer prices were up 2.4 percent as compared with July's year-on-year print of 1.9 percent.

Inflation is being closely watched for clues on the timing of the next interest rate increase. Economists expect the USA central bank will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its September 19-20 policy meeting.

The Fed meets next week, but is not expected to raise rates. Inflationary pressures have largely been subdued in recent months. Most analysts don't think the central bank will increase the cost of borrowing again at least until the end of the year.

Persistent weak United States inflation has stumped monetary policymakers and economists this year. The increase, while modest, was the biggest since April. There were also declines in the prices of fresh vegetables, fruits and meat. PPI rose 0.2 percent month-on-month, slightly below consensus expectations of 0.3 percent.

Meanwhile, personal consumption rose 0.2 percent sequentially and 2.3 percent year-on-year. A 1.7 percent surge in the cost of consumer loans accounted for more than half of the increase in the price of services last month. For the past five years, inflation has stayed below the Federal Reserve's target of annual price gains of 2 percent.

Other reports by Click Lancashire

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