US producer prices rise slightly more than expected in August By Reuters

WASHINGTON (Reuters) – U.S. producer prices rose slightly more than expected in August amid higher costs for services, but the trend remained consistent with easing inflation.

The producer price index for final demand rose 0.2 percent last month, the Labor Department’s Bureau of Labor Statistics said Thursday. Data for July was revised lower to show the PPI unchanged, instead of rising 0.1% as previously reported.

Economists polled by Reuters had expected the PPI to rise 0.1 percent.

In the 12 months to August, the PPI rose 1.7% after rising 2.1% in July. Government data on Wednesday showed that consumer prices rose marginally in August, although inflation remained somewhat stiff.

Cooling inflation and a slowing labor market have the Federal Reserve beginning its policy easing cycle next Wednesday, with a 25 basis point interest rate cut guaranteed.

The central bank kept its benchmark overnight interest rate in the current range of 5.25%-5.50% for a year, after raising it by 525 basis points in 2022 and 2023.

A 0.4% increase in services explained the PPI rise last month. Services, which fell 0.3 percent in July, were boosted last month by a 4.8 percent increase in hotel and motel room prices. But prices for air fares fell by 0.8%.

Trade services, which measures changes in margins received by wholesalers and retailers, rose 0.6%. Consumers reject higher prices, limiting the pricing power of businesses.

Portfolio management fees, hotel and motel accommodations, and airline fares are among the components that go into the calculation of the price index for personal consumption expenditures (PCE), the inflation measures the Fed pursues for its 2 percent target.

Commodity prices were unchanged last month after rising 0.6% in July. Energy prices fell by 0.9%. Food prices rose 0.1%. Excluding volatile food and energy components, commodity prices rose 0.2 percent after a similar advance in July.

The narrower measure of PPI, which excludes food, energy and trade, rose 0.3 percent, matching July’s gain. The so-called core PPI rose 3.3% year-on-year after climbing 3.2% in July.