Photographer: Victor J. Blue/Bloomberg

Wholesale Prices in U.S. Increase on Jump in Energy Costs

Rising U.S. wholesale prices in August reflect the biggest jump in energy costs since January, while underlying inflation remained contained, a Labor Department report showed Wednesday in Washington.

Highlights of Producer Prices (August)

  • Producer-price index rose 0.2% m/m (est. 0.3% rise) after 0.1% drop the previous month
  • PPI rose 2.4% y/y after 1.9% gain in prior 12-month period
  • Excluding food and energy, core gauge rose 0.1% m/m, up 2% y/y

Key Takeaways

About three-fourths of the monthly gain in the headline gauge came from goods, most of which was due to a 9.5 percent jump in gasoline, along with the biggest rise in jet-fuel costs since 2009. Since the PPI pricing date was Aug. 15, the data shouldn’t have captured the effects of Hurricane Harvey, said Scott Sager, a Bureau of Labor Statistics economist.

The PPI excluding food, energy, and trade services, a measure some economists prefer because it strips out the most volatile components, rose 1.9 percent from August 2016, the same as the prior month. That indicates broader inflation is taking time to pick up.

Price pressures in the production pipeline are still relatively contained, helping keep the Federal Reserve’s preferred consumer-price measure below its goal and one reason why policy makers plan to raise borrowing costs only gradually. Central bankers will update their interest-rate forecasts next week, indicating whether the chances of a December hike have ebbed.

The history of hurricanes such as Katrina indicates inflation measures could remain elevated for a few months, economists said.

Other Details

  • Excluding the volatile categories of food, energy and trade services, producer costs rose 0.2 percent from the previous month following no change
  • Energy prices rose 3.3 percent from the prior month, most since January; food costs fell 1.3 percent, biggest drop since February 2015, as wheat plunged 20.6 percent, most in nine years
  • Goods prices rose 0.5 percent after falling 0.1 percent in July
  • Prices for final demand services rose 0.1 percent from the prior month
  • Costs for health-care services, used to calculate the Commerce Department’s consumer-spending inflation index or the Fed’s preferred price measure, rose 0.3 percent from the prior month before adjusting for seasonal variations

— With assistance by Chris Middleton

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