Prices received by producers for goods and services reportedly declined in August. This to some extent affects the inflationary pressure that continues to threaten the U.S. economy.
The producer price index, a gauge of prices received at the wholesale level, declined 0.1%, based on a report from the Bureau of Labor Statistics on Wednesday. Excluding food, energy and trade services, the core HIPR rose 0.2%.
This reading was almost in line with a survey of economists who expected the HIPR to decline 0.1% and the core to rise 0.3%. On a year-on-year basis, the CPI/PPI rose 8.7%, a significant pullback from the 9.8% rise in July and the lowest annual increase since August 2021. The Core CPI rose 5.6% from a year ago, matching the lowest rate since June 2021.
This drop in prices is largely due to the drop in energy. The index for final energy demand declined 6% in August, which saw a 12.7% decline in the gasoline index. This has had an impact on consumer prices, which fell sharply after crossing $5 a gallon earlier in the summer.
The figures came a day after the BLS reported higher-than-expected consumer price index data for August. The two reports differ because the CPI shows what producers receive for finished goods, while the CPI reflects what consumers pay in the market. Rising core producer data still presents concerns for market players.
Following Tuesday's report, stocks slumped and expectations soared for action by the Federal Reserve at its meeting next week. Stock market futures were positive after the PPI report while Treasury yields were also higher.
The market is still divided between a half percentage point and a three-quarter point interest rate hike. After the CPI data is released, there is a probability of up to a 100 basis point increase in interest rates.
The US dollar index which measures the US dollar currency against six major currencies was traded down 0.28% to 109.225.
