Washington — US producer prices rose more than expected in October, driven by a surge in the cost of services, and there were also signs of steady increases in underlying wholesale inflation.
On Tuesday, the labour department said its producer price index (PPI) for final demand increased 0.4% in October a similar gain in September. In the 12 months through October, the PPI jumped 2.8%, which was the largest increase since February 2012. The PPI rose 2.6% year-on-year in September.
Economists had forecast the PPI edging up 0.1% last month and increasing 2.4% from a year ago.
Prices for services advanced 0.5% in October after increasing 0.4% in September. A 24.9% surge in margins for fuels and lubricants retailing accounted for almost half of the increase in the cost of services in October.
That helped to offset a 4.6% drop in the cost of petrol. Wholesale petrol prices soared 10.9% in September in the aftermath of Hurricane Harvey, which struck Texas in late August and reduced refining capacity in the Gulf Coast area.
Petrol prices are trending lower amid ample crude oil supplies. Last month’s rise in prices received by the nation’s farms, factories and refineries was also driven by rising costs for goods.
A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2% in October. It has increased by the same margin for three straight months. The so-called core PPI increased 2.3% in the 12 months through October after advancing 2.1% in September.
A weakening dollar could gradually lift core PPI. The dollar has lost 5.4% of its value against the currencies of the US’s main trading partners in 2017.
Inflation has remained stubbornly low, despite the labour market nearing full employment. The main inflation measure tracked by the Federal Reserve has remained below the US central bank’s 2% target since mid-2012.
Despite moderate price pressures, the Fed is expected to raise interest rates in December. There is cautious optimism that tightening labour market conditions will spur faster wage growth in 2018.
In October, food prices rose 0.5% after being unchanged in September. Core goods increased 0.3% after a similar in gain in the prior month. Prices for passenger cars were unchanged in October. The government introduced new motor vehicle models into the survey.
The cost of healthcare services gained 0.3% after being unchanged in September. Those costs feed into the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy.