Some good inflation news: Wholesale prices fell in August

Minneapolis
CNN Business
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Only one day after August Disappointing CPI report Caused a crash on Wall StreetA separate inflation report indicated that wholesale price increases are showing signs of improvement.

The Producer Price Index, which measures the average changes in prices paid to producers of goods and services, rose 8.7% in the twelve months to August, down from 9.8% in July. It is the second month in a row that the pace of increase has slowed.

the prices decreased by 0.1% in the month from July to August, according to Bureau of Labor Statistics data released Wednesday.

Economists had expected the producer price index to rise 8.8% year-on-year and fall 0.1% compared to July, according to Refinitiv estimates.

Since the PPI captures price changes that occur more in the initial stages, some consider the report a leading indicator of broader inflationary trends and what consumers can see at the store level.

The continued decline in the headline PPI mostly reflects stabilizing commodity prices from record levels, said Jason Reed, associate president and professor of finance at the University of Notre Dame’s Mendoza School of Business. The decline in energy prices “will push the producer price index down a bit,” he said. “But overall, we’re still seeing pricing levels go up.”

Excluding the more volatile components of food and energy, core inflation rose 0.2% from July and rose 8.1% in the twelve months to August.

A hot CPI report on Tuesday showed annual price inflation reached 8.3% in August. While that was down from 8.5% in July, the data also showed that core CPI, which strips out volatile gas and food prices, rose at twice the expected rate, dashing hopes that inflation has peaked.

America has been battling high inflation for decades in recent months, with the Federal Reserve implementing a series of historic interest rate increases in an effort to slow the economy and discourage more spending.

The two major inflation reports released this week will provide important context for Fed policy makers, who meet next week to determine the scope of the next central bank rate hike. Tuesday’s CPI report has already prompted some analysts to call for an increase of 100 basis points, above recent expectations of a third in a row of 75 basis points.

Meanwhile, consumers are paying hundreds of extra dollars each month as food, shelter, and health care prices rise. Much uncertainty still looms, including the Russian war in Ukraine and US rail workers strike.

“The Fed can really only affect the demand side of inflation — it’s really hard to raise rates and unwind the supply chain or raise rates and help the war in Ukraine,” said Notre Dame’s Reid.

“If I get a big supply shock again, I think the Fed will continue its course,” Reid added. “It can’t be considered slow anymore.”