The Final Demand Producer Price Index (PPI) inched up 0.1% in August from July, in line with a series of bare increases in recent months. Year-over-year, the index was up 1.8%. The core PPI — excluding food, energy, and trade services — was up 0.4% in August, and was 1.9% higher than August 2018. The report was much as expected and market attention will shift to the upcoming release of the CPI numbers at 8:30 ET on Thursday.
The total increase was restrained by softening price for goods including down 0.6% for foods and down 2.5% for energy. Food prices reflected the arrival of summer produce. The BLS said “almost two thirds” of the overall decline could be attributed to energy where gasoline costs fell 6.6%. Excluding food and energy, prices were flat. Prices for services were up 0.3% overall and trade services were up 0.2%.
Services costs continued to dominate what upward pressure in overall prices there is. Where goods prices were down 0.1% compared to a year ago, services costs were up 2.7% including an increase in trade services of up 3.8%.
The FOMC gives more attention to the CPI numbers, but the PPI is indicative of the influences on prices for the economy. Low energy prices have continued to drag down those for commodities generally, while services costs continue to climb steadily. The PPI headline points to reasonably stable price movements outside of some month-to-month variation. It remains not far off the Fed’s 2% inflation goal.
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