https://www.reuters.com/article/us-usa-economy-inflation/higher-gasoline-prices-boost-u-s-producer-inflation-idUSKCN1BO1JG
U.S. producer prices rebounded in August, driven by
a surge in the cost of gasoline, and there were also signs of a pickup
in underlying producer inflation.
The Labor
Department said on Wednesday its producer price index for final demand
increased 0.2 percent last month after slipping 0.1 percent in July. In
the 12 months through August, the PPI rose 2.4 percent after advancing
1.9 percent in July.
Economists said the uptick
in producer prices was unlikely to assuage Federal Reserve
policymakers’ concerns about low inflation as the increase was largely
due to a 9.5 percent increase in the cost of gas. That was the largest
rise since January and followed a 1.4 percent decline in July.
Though
gas prices could rise further in September in the wake of Hurricane
Harvey, which disrupted oil refinery production in Texas, a reversal was
expected because of ample crude supplies.
“Energy
price gains, which will likely dominate the September inflation reports
in the aftermath of Hurricanes Harvey and Irma, will likely be viewed
as having a temporary impact on inflation by the Fed,” said John Ryding,
chief economist at RDQ Economics in New York.
Economists had forecast the PPI gaining 0.3 percent last month and accelerating 2.5 percent from a year ago.
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. The so-called core PPI increased 1.9 percent in the
12 months through August after a similar gain in July.
Prices
of U.S. Treasuries were trading lower, while the dollar rose against a
basket of currencies. U.S. stock indexes were little changed after
hitting record highs on Tuesday.
EYES ON INFLATION
Inflation
is being closely watched for clues on the timing of the next Fed
interest rate increase. Economists expect the U.S. central bank will
announce a plan to start reducing its $4.2 trillion portfolio of
Treasury bonds and mortgage-backed securities at its Sept. 19-20 policy
meeting.
The Fed is expected to delay raising rates until December.
August’s
consumer inflation report scheduled for release on Thursday is expected
to show gasoline prices helped push up the Consumer Price Index by 0.3
percent after a 0.1 percent rise in July, according to a Reuters survey
of economists.
Last month’s increase in the PPI
is unlikely to translate into a similar gain in the Fed’s preferred
inflation measure, the personal consumption expenditures (PCE) price
index excluding food and energy.
The annual
increase in the core PCE has consistently undershot the central bank’s 2
percent inflation target since mid-2012. The core PCE rose 1.4 percent
in July, the smallest year-on-year increase since December 2015.
The
cost of food fell 1.3 percent as wheat prices recorded their biggest
drop since April 2008. The decrease in food prices last month was the
largest since February 2015 and followed an unchanged reading in July.
There were also declines in the prices of fresh vegetables, fruits and
meat.
Core
goods prices rose 0.2 percent last month after slipping 0.1 percent in
July. The cost of services edged up 0.1 percent after falling 0.2
percent in July. 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.
The cost of healthcare services increased 0.3 percent after a similar gain in July.
“This
morning’s producer price gains for August are a step in the right
direction,” said Scott Anderson, chief economist at the Bank of the West
in San Francisco. “However, they are not yet quite as strong or as
broad-based as the Federal Reserve would like to see to help push core
consumer price inflation back up to the Fed’s 2 percent target.”
