October 10, 2018 11:45 AM, EDT

Wholesale Prices Rose 0.2% in September

Combine Nati Harnik/Associated Press

U.S. wholesale prices rose 0.2% last month, held down by lower food and energy costs, suggesting that inflation remains in check despite the economy’s robust growth.

The Labor Department said Oct. 10 that its producer price index — which measures inflation before it reaches consumers — rose 2.6% compared with a year earlier, the smallest increase since January. Wholesale prices rose in September after two months of flat or declining readings.

Excluding the volatile food and energy categories, core wholesale prices rose 0.2% in September and 2.5% from a year earlier.

Producer Price index Chart

Bloomberg News

Inflation has crept higher this year, yet core prices remain close to the Federal Reserve’s target of 2% and have yet to show signs of rapid acceleration.

There were some signs of rising costs in the Oct. 10 report: Transportation and warehousing prices rose 1.8%, the largest monthly gain in nearly nine years. The increase was mostly driven by higher wholesale prices for airline tickets, which jumped 5.5%, the biggest increase in a decade.

Wholesale food costs fell 0.6% last month and gas prices dropped 3.5%, declines that could lower consumer prices in the coming months.

The Federal Reserve is keeping a close eye on price changes as it monitors the economy for signs of overheating. The unemployment rate fell to a 49-year low of 3.7% last month, which could spur greater wage increases in the coming months. Companies may then have to raise prices to offset the costs of higher pay.

So far, there is only limited evidence that such a trend is emerging. Average hourly pay has picked up but still is increasing at a modest pace. The Fed’s preferred inflation gauge increased just 2.2% in August, the latest data available, down from a 2.3% annual gain the previous month.