Wholesale inflation eases again, PPI shows, ahead of Fed interest-rate cuts

By Jeffry Bartash

Prices are no longer rising very rapidly

The numbers: U.S. wholesale prices showed a mild increase in August and reinforced the idea the rate of inflation is returning to low prepandemic levels.

The moderate increase in wholesale costs follows a similarly mild rise in consumer prices last month. With inflation slowing, the Federal Reserve is widely expected to cut interest rates next week.

The producer-price index rose 0.2% last month, the government said Thursday. That matched the forecast of economists polled by the Wall Street Journal.

The increase in wholesale prices in the past year slowed to 1.7% from 2.1% in the prior month and touched the lowest level in six months.

A separate measure of wholesale prices that strips out volatile food and energy costs and trade margins advanced at a slightly faster 0.3% pace.

The 12-month rate edged up to 3.3% from 3.2%.

Key details: The cost of goods were unchanged in August and they are flat over the past year.

The price of services rose 0.4% in August, leaving the 12-month increase at 2.7%. That's closed to the annual prepandemic average.

The wholesale cost of partly finished goods fell slightly, and raw-material prices sank by 3.7% largely because of cheaper energy.

The PPI report captures what companies pay for supplies such as fuel, packaging and so forth. These costs often feed into the price of consumer goods and services and give a sense of whether inflation is rising.

Big picture: The rate of inflation is getting closer to the Federal Reserve's 2% annual goal, putting the central bank on track to cut interest rates for the first time since the pandemic.

All the inflation of the past few years hasn't gone away, of course, but prices are no longer rising rapidly. Lower inflation and reduced borrowing rates should help to boost the economy.

Looking ahead: "The August PPI data provide more encouragement for the Fed that inflation has been tamed," said Paul Ashworth, chief North American economist at Capital Economics.

Market reaction: The Dow Jones Industrial Average and S&P 500 were set to rise in Thursday trading.

-Jeffry Bartash

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09-12-24 0927ET

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