People display merchandise for pedestrians around Times Square, in New York, U.S., December 25, 2023. REUTERS/Eduardo Munoz/File Photo
WASHINGTON: U.S. producer prices increased slightly more than expected in August amid higher costs for services, but the trend remained consistent with subsiding inflation.
The producer price index for final demand rose 0.2% last month, the Labor Department's Bureau of Labor Statistics said on Thursday. Data for July was revised lower to show the PPI being unchanged instead of edging up 0.1% as previously reported. Economists polled by Reuters had forecast the PPI gaining 0.1%.
In the 12 months through August, the PPI increased 1.7% after advancing 2.1% in July. Government data on Wednesday showed consumer prices rising marginally in August, though some stickiness remains in inflation.
Cooling inflation and a slowdown in the labor market have positioned the Federal Reserve start its policy easing cycle next Wednesday, with a 25 basis points rate cut guaranteed.
The central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for a year, having raised it by 525 basis points in 2022 and 2023.
A 0.4% increase in services accounted for the rise in the PPI last month. Services, which dropped 0.3% in July, were last month boosted by a 4.8% surge in the prices of hotel and motel rooms. But prices for airline fares fell 0.8%.
Trade services, which measure changes in margins received by wholesalers and retailers, rose 0.6%. Consumers are pushing back against higher prices, limiting businesses' pricing power.
Portfolio management fees, hotel and motel accommodation and airline fares are among components that go into the calculation of the personal consumption expenditures (PCE) price indexes, the inflation measures tracked by the Fed for its 2% target.
Goods prices were unchanged last month after rising 0.6% in July. Energy prices dropped 0.9%. Food prices gained 0.1%. Excluding the volatile food and energy components, goods prices climbed 0.2% after a similar advance in July.
The narrower measure of PPI, which strips out food, energy and trade, rose 0.3%, matching July's gain. The so-called core PPI increased 3.3% year-on-year after climbing 3.2% in July. - Reuters
