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US producer prices increase broadly in September

Friday, October 14, 2016 - 20:55
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US producer prices rose more than expected in September as the cost of energy products and a range of other goods increased, supporting views that domestic inflation will start trending higher.

[WASHINGTON] US producer prices rose more than expected in September as the cost of energy products and a range of other goods increased, supporting views that domestic inflation will start trending higher.

The Labour Department said on Friday its producer price index for final demand increased 0.3 per cent after being unchanged in August. In the 12 months through September, the PPI jumped 0.7 per cent, the biggest increase since December 2014. The PPI was flat in the 12 months through August.

Economists polled by Reuters had forecast the PPI rising 0.2 per cent last month and accelerating 0.6 per cent from a year ago.

A 0.7 per cent increase in the cost of goods, including energy, accounted for more than three quarters of the rise in final demand prices.

Producer prices are rising as some of the drag from the dollar's past surge starts to ease. The dollar rally appears to have peaked early this year and oil prices having pushed off multi-decade lows, which economists expect could allow inflation to gradually rise toward the Federal Reserve's 2 per cent target.

Energy prices jumped 2.5 per cent in September after sliding 0.8 per cent the prior month. Wholesale food prices climbed 0.5 per cent after declining for two straight months. There were also increases in the cost of passenger cars.

Healthcare costs edged up 0.1 per cent last month after increasing 0.4 per cent in August. The cost of hospital outpatient care rose 0.1 per cent, slowing after recent sharp gains. These healthcare costs feed into the Fed's preferred inflation measure, the core personal consumption expenditures (PCE) index.

Last month, the volatile trade services component - which measures changes in margins received by wholesalers and retailers - dropped 0.4 per cent after falling 0.6 per cent in August.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.3 per cent after a similar gain in August.

The so-called core PPI increased 1.5 per cent in the 12 months through September, the largest rise since November 2014. That followed a 1.2 per cent jump in August.

REUTERS