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Key Takeaways
- Wholesale prices grew at a monthly rate of 0.2% in August, while the annual rate of 1.7% was better than the prior month.
- Economists said the wholesale pricing data should keep the Federal Reserve on schedule to reduce interest rates at its upcoming September meeting.
- An increase in guest room rentals helped push service prices higher in August, but economists said overall inflation trends pointed lower.
Prices paid at the wholesale level increased slow enough in August that the Federal Reserve is still likely on the path to cut interest rates later this month, economists said.
According to data from the Bureau of Labor Statistics, wholesaler prices increased 0.2% in August compared with the prior month. Compared with the same month last year, the Producer Price Index (PPI) was higher by 1.7%, less than July’s reading.
Service Prices Push Wholesale Inflation Higher
Inflation data this week has shown prices in some areas remain elevated, economists said. But overall, inflation is still on a path toward the Federal Reserve’s 2% annual target, they wrote. Thursday’s PPI report reaffirmed the idea among economists and traders that the Fed will enact a quarter-point rate cut at its September meeting.
“A cooling economy and deflating labor market should dampen price pressures going forward,” wrote Nationwide Financial Markets Economist Oren Klachkin.
Service prices increased, including a surprising jump in guest room rental costs, while prices for goods remained unchanged from the prior month.
“Some of the larger gains in the index appear to be more noise than signal,” wrote Michael Pearce, deputy chief U.S. economist at Oxford Economics. “More broadly, we expect producer price inflation to remain moderate, helped by lower oil prices and ongoing declines in factory gate prices in China.”