Wholesale inflation picked up in August, as energy costs kept rising
By Elisabeth Buchwald, CNN
(CNN) — US inflation at the wholesale level accelerated last month, as the war with Iran pushed up energy prices.
The Producer Price Index, which tracks price changes received by US producers and manufacturers, increased 5.4% in the 12 months that ended in August. That was a 0.6% acceleration from 4.8% in July, according to Bureau of Labor Statistics data released Thursday.
On a monthly basis, prices across goods and services rose 0.4% in August from 0.1% in July, matching economists’ expectations.
Prices for goods alone rose to 1.1%, a significant shift from July, when they fell by 0.4%. More than three-fourths of run-up in goods prices in August stemmed from a 4.2% monthly rise in energy prices. And there’s no sign this is going to change soon because crude oil futures have surged so far in September. Brent crude, the global oil benchmark, raced above $105 a barrel on Thursday for the first time since late May.
But two of the most volatile categories, which make up a measure known as “core” inflation, rose at a more muted annualized rate of 4.6% versus 4.3% in July.
Thursday’s report could complicate the Federal Reserve’s efforts to bring inflation down to its 2% target. Central bank officials meet next week to discuss monetary policy, with investors expecting the Fed to raise rates at least once before the end of the year.
The chances of a rate hike occurring at next week’s meeting rose to 70% from 64% after Thursday’s PPI report was released, according to the CME FedWatch.
PPI serves as a potential bellwether for what consumers could experience in the near future. Thursday’s report comes one day ahead of the August Consumer Price Index data, which holds greater significance this week after Fed Governor Christopher Waller said stubborn inflation would push him to “consider a rate hike,” though he favors holding rates steady otherwise.
Economists are expecting Friday’s CPI report to show the annual rate of price changes slowed to 3.3% last month from 3.4% in July. On a monthly basis, though, they’re expecting consumer prices to jump by 0.4% from July’s 0.1% rate.
On a monthly basis, core inflation slowed to 0.2% in August from 0.3% the prior month. That means that the higher energy costs aren’t fully working their way through many other input costs for businesses.
Outside of energy, pricing pressure is also coming from electronic component costs, which leapt by 3.4% last month and are up 27.6% for the year. That’s a byproduct of the AI buildout, Stephen Brown, chief North America economist at Capital Economics, said in a note Thursday morning.
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