Key facts
- US producer prices rose 0.4% in August from a month earlier.
- The annual increase in producer prices was 5.4% in August.
- Energy prices rose 4.2% in August.
- S&P 500 and Nasdaq futures extended losses following the PPI data.
- The Labor Department reported the PPI data on Thursday.
U.S. producer prices rose in August in line with expectations, driven by a rebound in energy costs, according to data from the Labor Department's Bureau of Labor Statistics. The Producer Price Index for final demand increased 0.4% last month, matching economists' forecasts. Annually, the PPI advanced 5.4% through August, up from 4.8% in July.
Energy prices saw a 4.2% increase in August after declining for two consecutive months, boosted by renewed hostilities between the United States and Iran that impacted oil prices. Wholesale food prices edged up 0.1% after a drop in July. Producer goods prices surged 1.1%, or 0.4% excluding volatile food and energy components, while services prices nudged up 0.1%.
The Federal Reserve primarily tracks Personal Consumption Expenditures (PCE) price indexes for its inflation target. However, changes to how the government calculates prices for portfolio management, investment advice, legal services, and computer software will affect the PPI's impact on PCE inflation. Economists at Morgan Stanley anticipate these methodology changes could lead to downward revisions in PCE inflation data for earlier months.
Some economists suggest the Federal Reserve should consider raising interest rates at its upcoming meeting, citing persistent inflation and a strengthening labor market. Financial markets had priced in a roughly 62% chance of a 25-basis-point rate hike before the PPI report.