Wholesale Prices in U.S. Little Changed as Fuel Costs Drop

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Wholesale prices in the U.S. were little changed in August, restrained by lower fuel costs that signal inflation will remain weak.

Stagnant producer prices last month followed a 0.2 percent advance in July, Labor Department figures showed Friday in Washington. The median forecast of 73 economists surveyed by Bloomberg called for a 0.1 percent drop. Costs fell 0.8 percent over the past 12 months.

Depressed prices at the wholesale level, also reflecting declines in global commodity costs, signal inflation may linger below the Federal Reserve’s goal for some time. Fed policy makers, who meet next week to consider raising interest rates for the first time since 2006, have said low energy prices and the stronger dollar are transitory influences on inflation.

“The inflation picture is generally still very subdued,” said David Sloan, a senior economist at 4Cast Inc. in New York. “The Fed has got a bit of a tough dilemma. The labor market is getting close to full employment and growth is quite solid but inflation is clearly below the Fed’s target. It’s a close call” on whether the central bank will hike rates next week.

Projections in the Bloomberg survey ranged from a drop of 0.6 percent to an advance of 0.1 percent.

Food prices rose 0.3 percent, the report showed. Energy expenses dropped 3.3 percent, with gasoline decreasing 7.7 percent, the biggest decline since January.

Wholesale prices excluding food and energy rose 0.3 percent, matching the prior month’s gain and exceeding the median forecast that projected a 0.1 percent advance. The increase was propelled by widening profit margins at clothing retailers.

Less Volatile

Excluding food and energy and also eliminating trade services to arrive at a reading that some economists prefer because it strips out another of the most volatile components of PPI, costs rose 0.1 percent after rising 0.2 percent in July. They were up 0.7 percent from the same month a year earlier.

The producer price gauge is one of three monthly inflation reports released by the Labor Department. The first of those, released on Thursday, showed import costs fell 1.8 percent in August from a month earlier, the biggest drop since January. Compared with August 2014, the 11.4 percent slump was the biggest since 2009.

The consumer price index is due on Sept. 16. Economists surveyed by Bloomberg predict it may have declined in August.

Crude oil has fluctuated since dipping below $40 in August as concern over slowing Chinese growth fueled volatility in world markets. Prices are down more than 25 percent from this year’s June peak on speculation a global glut will persist.

Fed policy makers, who will meet Sept. 16-17 to debate when to begin lifting interest rates for the first time since 2006, are keeping a close watch on inflation. That’s part of their dual mandate, which includes low unemployment.

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