August Wholesale Inflation Surges, But Core Prices Remain Stable
Inflation at the wholesale level in August witnessed an unexpected rise, contradicting recent indicators that suggested a cooling trend in price hikes.
The U.S. Department of Labor disclosed that the producer price index (PPI), which gauges the price received by producers for their goods and services, marked a seasonally adjusted upswing of 0.7% in August.?
Annually, this figure stood at a 1.6% rise. This monthly hike surpassed the Dow Jones projection of a 0.4% increment, marking the largest one-month increase since June of the previous year.
Yet, a silver lining appeared when discounting food and energy prices. The core PPI showed a 0.2% increase, aligning perfectly with estimates. When scrutinized over a 12-month period, the core PPI exhibited a growth of 2.1%, the lowest annual surge since January 2021.?
Removing trade services alongside food and energy, the PPI saw an uptick of 0.3%.
This revelation emerged just a day after the release of the more scrutinized consumer price index (CPI). The CPI indicated a monthly rise of 0.6% and an annual increase of 3.7%. Taking out food and energy, the core CPI showcased hikes of 0.3% and 4.3%, respectively.
Much like the CPI, the dominant force propelling the PPI was a significant boost in energy costs. The PPI energy sector experienced a dramatic 10.5% increase in August, catalyzed by a 20% escalation in gasoline prices.
August also saw final demand goods prices surging by 2%, which is the steepest one-month hike since June 2022. Meanwhile, services prices posted a 0.2% increase.
On Thursday, the Commerce Department provided further insight into the economy, estimating a 0.6% boost in retail sales for August. This surpassed the Dow Jones prediction of a 0.1% rise. Even after excluding automobile sales, the figure still remained at 0.6%, outpacing the 0.4% estimate.
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These figures do not factor in inflation, suggesting that the consumer spirit remains unbroken in the face of rising costs and accumulating credit card debt. The influence of soaring energy costs was evident in the retail report too, as gas station sales rocketed by 5.2%.
The market seemed unfazed by these revelations. Futures associated with the Dow Jones Industrial Average climbed about 80 points at the onset. Concurrently, Treasury yields also exhibited a slight uptick.
While the PPI evaluates domestic prices, representing the expense of generating goods and services, the CPI mirrors the expenditure by consumers in the market, inclusive of imported goods' prices.
Both these metrics hint that even though inflation continues to burden U.S. families, the inflation rate's acceleration seemed to be decelerating in the past months.?
This slowing trend is crucial for the Federal Reserve as they map out their subsequent moves following a sequence of 11 rate hikes that amounted to 5.25 percentage points.
Current market dynamics suggest a high probability that the Fed will refrain from escalating benchmark rates in the coming week.?
Although central bank officials had hinted at one more rate surge by 2023's end, market futures on Thursday morning projected a 42% likelihood of this occurring in November, based on CME Group's data.
Lastly, another economic update on Thursday revealed a slight increase in initial jobless claims, hitting 220,000 for the week concluding on Sept. 9. This figure was marginally lower than the Dow Jones' forecast of 225,000.