US Wholesale Inflation Accelerates as Energy Prices Surge
US inflation at the wholesale level accelerated last month, driven by rising energy prices due to the conflict with Iran. The Producer Price Index, which monitors the price changes experienced by US producers and manufacturers, rose by 5.4% over the 12 months concluding in August. That represented a 0.6% acceleration from 4.8% in July, as per data released by the Bureau of Labour Statistics on Thursday. In August, prices for goods and services increased by 0.4% on a monthly basis, up from 0.1% in July, aligning with economists’ forecasts. Prices for goods alone increased to 1.1%, marking a notable change from July, when they declined by 0.4%. Over three-quarters of the increase in goods prices in August can be attributed to a 4.2% monthly rise in energy prices.
There are no indications that this situation will alter in the near term, as crude oil futures have experienced a significant increase throughout September. Brent crude, the global oil benchmark, surged past $105 a barrel on Thursday, marking its highest level since late May. However, two of the most volatile categories, which contribute to a measure referred to as “core” inflation, increased at a more subdued annualised rate of 4.6% compared to 4.3% in July. Thursday’s report may pose challenges for the Federal Reserve in its pursuit of reducing inflation to the 2% target. Central bank officials are scheduled to convene next week to deliberate on monetary policy, as investors anticipate that the Fed will implement at least one rate increase prior to the year’s conclusion.
The likelihood of a rate hike at next week’s meeting increased to 70% from 64% following the release of Thursday’s PPI report, as indicated by the CME FedWatch. PPI serves as a potential indicator for what consumers might encounter in the near future. Thursday’s report arrives just prior to the release of the August Consumer Price Index data, which carries increased importance this week following comments from Fed Governor Christopher Waller. He indicated that persistent inflation might lead him to “consider a rate hike,” although he generally prefers to maintain current rates. Economists anticipate that Friday’s CPI report will reveal a deceleration in the annual rate of price changes, decreasing to 3.3% last month from 3.4% in July.
On a monthly basis, they anticipate consumer prices to increase by 0.4%, a notable rise from July’s rate of 0.1%. In August, core inflation experienced a deceleration, registering at 0.2%, down from 0.3% in the preceding month. That indicates that elevated energy expenses are not entirely permeating various other input costs for enterprises. Excluding energy, pricing pressures are also being driven by electronic component costs, which surged by 3.4% last month and have increased by 27.6% year-over-year. That is a byproduct of the AI buildout, as noted by Stephen Brown in a communication on Thursday morning.
