Underlying U.S. producer inflation rose less than economists expected in August, even as sharply higher diesel, gasoline and other energy costs pushed the broader producer price index and its annual rate higher.
By yourNEWS Media Newsroom.
A key measure of underlying producer inflation came in below expectations in August, offering some evidence of easing price pressure beneath a sharp increase in energy costs that continued to lift the broader measure of prices received by U.S. businesses.
The producer price index excluding food and energy increased 0.2% from July, slowing from the prior month’s revised 0.3% gain and coming in below economists’ forecast for another 0.3% increase.
On a year-over-year basis, core producer prices were 4.6% higher than in August of last year. That matched expectations but accelerated from July’s 4.2% annual increase.
The headline producer price index rose 0.4% during August, matching the consensus estimate and accelerating from an upwardly revised 0.1% increase in July. Compared with a year earlier, overall producer prices were up 5.4%, above July’s 4.8% annual rate and slightly higher than the 5.3% increase economists had expected.
The divergence between the headline and core readings largely reflected rapidly rising energy prices, which have been climbing since the beginning of the war with Iran.
Producer energy prices surged 4.2% in August alone and stood 24.4% above their level a year earlier. Energy purchased by the government rose even more sharply, climbing 9% for the month and 36.7% over the previous 12 months.
Export energy prices jumped 8% in August and were 40.7% higher than a year ago. Consumer energy goods recorded a comparatively smaller monthly increase of 2.8%, though they remained 20.8% above August of last year.
Diesel fuel accounted for an especially large portion of the increase. Producer diesel prices soared 24.1% in August and were 77.8% higher than a year earlier.
Gasoline rose 4.2% from July and 46.5% from a year ago, while home heating oil climbed 22.8% during the month and was up 89.9% over the previous 12 months.
Not every household energy category moved higher. Residential electricity prices declined 0.5% in August and were up a comparatively modest 3.2% from a year earlier. Residential natural gas prices slipped 0.1% for the month and remained 4.6% above their year-ago level.
The impact of energy was also evident in the broader goods category. Final-demand goods prices rose 1.1% in August after declining during each of the previous two months.
More than three-fourths of that monthly increase was attributable to energy prices, while diesel fuel alone accounted for more than one-third of the advance.
Transportation costs added another source of pressure.
Prices for transportation and warehousing of consumer goods increased 1.7%, while transportation of capital equipment rose 1.8%. Passenger transportation costs jumped 4.1%.
Taken together, transportation and warehousing prices increased 2.3% during August.
Services prices, by comparison, remained considerably more restrained. The services index edged up 0.1%, marking its third consecutive monthly increase.
That gain was driven by transportation and warehousing. Once those categories were removed, services prices were unchanged from July.
The August figures therefore showed two distinct inflation trends within producer prices. Energy and transportation costs were responsible for much of the acceleration in the headline index, while underlying monthly inflation excluding food and energy moderated and came in below economists’ expectations.
The producer price index tracks prices received by American businesses for goods and services sold to a broad range of purchasers, including consumers, households, other businesses and foreign buyers.
Although the measure is sometimes described as a wholesale price index, it does not simply track wholesale transactions. The headline figures are drawn from the final-demand index, which measures products sold to end users rather than goods and services used as inputs in producing other products.
The PPI also differs from the consumer price index in important ways. Import prices are excluded because those payments do not go to U.S. producers, while export prices are included because American businesses receive those payments. Export prices, by contrast, are not included in the consumer price index.
August’s report consequently showed that price pressures confronting U.S. producers remain elevated, but their source has become increasingly concentrated in energy-related categories.
While the annual headline inflation rate accelerated to 5.4% and energy costs posted steep increases across diesel, gasoline, heating oil and export markets, the smaller-than-expected 0.2% monthly rise in core producer prices indicated a more moderate pace of underlying inflation during the month.
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