Prices received by producers for goods and services fell in August, a slight respite from inflationary pressures that threaten to push the US economy into recession.
The producer price index, a gauge of prices received at the wholesale level, fell 0.1%, according to a report from the Bureau of Labor Statistics on Wednesday. Excluding food, energy, and business services, the PPI increased 0.2%.
Economists surveyed by Dow Jones had expected the headline PPI to decline 0.1%.
Year over year, the headline PPI increased 8.7%, a substantial retracement from the 9.8% increase in July and the lowest annual increase since August 2021. The core PPI increased 5.6% year over year above, matching the lowest rate since June 2021.
As has been the case over the summer, the drop in prices was largely due to the drop in energy.
The final demand energy index fell 6% in August, which saw a 12.7% drop in the gasoline index that was responsible for more than three-quarters of the 1.2% drop in prices. of final demand goods. That helped sway consumer prices, which fell sharply after briefly topping $5 a gallon at the pump earlier in the summer.
Wholesale services prices rose 0.4% in the month, signaling a new transition for a pandemic-era economy in which goods inflation soared. Final demand service prices rose 0.4% in the month, with the rest coming from a 0.8% increase in commercial services.
Those numbers come a day after the BLS reported consumer price index data for August that were higher than expected. The two reports differ in that the PPI shows what producers receive for finished products, while the CPI reflects what consumers pay in the market.
The PPI can be a leading indicator of inflation as wholesale prices fuel the economy. However, its importance has dimmed over the years, as manufactured goods account for a smaller share of total spending.
Following Tuesday’s report, stocks tumbled and expectations for action from the Federal Reserve at its meeting next week rose. Stock market futures were positive after the PPI report, while Treasury yields were also higher.
Markets were torn between an interest rate hike of half a percentage point and three-quarters of a point. After the release, the market fully priced in a three-quarter point move, and there is now a 1 in 3 chance of a full one percentage point rise, according to fed funds futures data tracked by CME Group.