Picture: REUTERS
Picture: REUTERS

Washington — US producer prices rebounded in August, driven by a surge in the cost of petrol, and there were also signs of a pickup in underlying producer inflation.

The Labor Department said its producer price index (PPI) for final demand increased 0.2% last month after slipping 0.1% in July. In the 12 months to end-August, the PPI rose 2.4% after advancing 1.9% in July.

Economists had forecast the PPI gaining 0.3% in August and accelerating 2.5% from a year ago.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2% last month after being unchanged in July. The so-called core PPI increased 1.9% in the 12 months to end-August after a similar gain in July.

Inflation is being closely watched for clues on the timing of the next interest rate increase from the Federal Reserve.

Economists expect the US central bank will announce a plan to start reducing its $4.2-trillion portfolio of treasury bonds and mortgage-backed securities at its September 19-20 policy meeting.

The Fed is expected to delay raising rates until December.

Last month’s increase in producer inflation is unlikely to translate into a similar gain in the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy.

The annual increase in the core PCE has consistently undershot the central bank’s 2% inflation target since mid-2012. The core PCE rose 1.4% in July, the smallest year-on-year increase since December 2015.

Last month, petrol prices jumped 9.5% after declining 1.4% in July. The increase was the largest since January and accounted for 75% of the 0.5% rise in the prices of goods.

The cost of food fell 1.3%, the biggest drop since February 2015, after being unchanged in July.

Core goods prices rose 0.2% in August after slipping 0.1% in July. The cost of services edged up 0.1% after falling 0.2% in July. A 1.7% surge in the cost of consumer loans accounted for more than half of the increase in the price of services last month.

The cost of healthcare services increased 0.3% after a similar gain in July. Those costs feed into the core PCE price index.

Reuters

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