US Producer Prices Fall for a Second Month as Fuel Costs Retreat

David Paul Morris/Bloomberg News

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A measure of U.S. producer prices fell for a second month in August as fuel costs continued to retreat, though an underlying measure of wholesale costs solidified a sign of persistent inflation in the production pipeline.

The producer price index for final demand decreased 0.1% from a month earlier and increased 8.7% from a year ago, Labor Department data showed Sept. 14. Excluding the volatile food and energy components, the so-called core PPI climbed a larger-than-forecast 0.4% in August and was up 7.3% from a year earlier.

The figures come on the heels of hotter-than-expected consumer price data and feed into mounting concerns about the breadth and pace of U.S. inflation. While gasoline prices eased in the month, producers faced higher costs for services and some goods such as construction equipment and beverages.

With inflation poised to be elevated for some time, the Federal Reserve is expected to raise interest rates by another 75 basis points at its upcoming meeting, marking the third-straight historically large increase.

RELATED: US Inflation Falls for 2nd Straight Month on Lower Gas Costs

Consumer price index data out Sept. 13 showed inflation picked up in August as widespread price pressures — from rent to food to utilities — offset a sizable decline in gasoline prices. Rising costs at the producer level tend to feed into consumer prices, but the CPI report also showed how household demand is playing into price increases.

The report showed goods prices fell 1.2% as gasoline prices continued to fall. Food prices were unchanged from the prior month. Excluding food and energy, the index of goods costs rose 0.2% for a second month.

Services prices increased 0.4%, the most in three months. Forty percent of the gain was due to higher margins for fuel retailers.

The Labor Department report follows separate data from the Institute for Supply Management and S&P Global, both of which showed an easing in price pressures. ISM’s gauge of prices paid by manufacturers for raw materials fell to a two-year low in August.

That said, a potential railway strike threatens to mangle supply chains once again. The walkout, which could begin later this week, would disrupt the transportation of goods ranging from food and lumber to coal.

Producer prices excluding food, energy and trade services — which strips out the most volatile components of the index — climbed 0.2% from the prior month and 5.6% from August of last year.

Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, dropped for a second month. Even excluding food and energy, the measure dropped 0.8%.

— With assistance from Olivia Rockeman.

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