Wholesale Prices in U.S. Were Little Changed in August

Wholesale prices in the U.S. were little changed in August from the prior month, restrained by a plunge in energy costs and a sign of limited inflation in the production pipeline.

The producer-price index was unchanged, matching the median forecast in a Bloomberg survey of economists, after a 0.1 percent rise the prior month, a Labor Department report showed today in Washington. Over the past 12 months, wholesale prices rose 1.8 percent. The PPI excluding food and energy rose 0.1 percent from a month earlier.

Falling energy costs and subdued global markets are helping to limit inflation. Muted price pressures have allowed Federal Reserve officials room to keep interest rates low even as they’re on pace to end their unprecedented monthly asset purchase program in October.

“Inflation measures both this month and in the prior month have been influenced by tumbling energy prices,” said Laura Rosner, U.S. economist at BNP Paribas in New York. “This will probably at least ease some worries about projections of a buildup in inflation as we move lower on the unemployment rate.”

The median estimate was based on a survey of 72 economists. Projections ranged from a drop of 0.3 percent to a 0.2 percent advance. Wholesale prices excluding food and energy were forecast to rise 0.1 percent after a 0.2 percent gain in July.

Year Ago

Compared with 12 months earlier, companies paid 1.8 percent more for goods and services, up from a 1.7 percent year-over-year rise in July. The core index also increased 1.8 percent in the year ended August after a 1.6 percent gain.

The wholesale prices report was expanded this year to include 75 percent of all U.S. goods and services, up from about a third for the old metric, which tallied the costs of goods alone. The index now includes prices received for services, government purchases, trade and construction.

The cost of services increased 0.3 percent in August, reflecting higher transportation costs. Prices for goods decreased 0.3 percent last month and were up 1.7 percent since August 2013.

Energy costs declined 1.5 percent last month after a 0.6 percent drop in July. Gas prices have been falling for almost three months, helping cushion household budgets. The average price of a gallon of regular unleaded gas was $3.38 yesterday, its lowest level since February, according to AAA, the largest U.S. motoring club.

Cheaper Food

Wholesale food costs also fell, dropping 0.5 percent in August, the most in three months.

Fed officials are expected to discuss this week whether to emphasize that an increase in the federal funds rate depends on progress toward the twin goals of full employment and low and stable inflation, rather than guidance on time periods and dates.

The policy makers on the Federal Open Market Committee also will release an updated set of projections for measures including unemployment and growth at the conclusion of their two-day meeting tomorrow.

The personal consumption expenditures index, the Fed’s preferred inflation gauge, rose 1.6 percent in July from a year earlier, short of the Fed officials’ 2 percent goal.

Today’s producer price index reading is one of three monthly inflation gauges from the Labor Department. The CPI, due for release tomorrow, was probably unchanged in August, according to the Bloomberg survey median. A report last week showed the cost of imported goods fell 0.9 percent last month.

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