US wholesale prices rise on energy costs

WASHINGTONRising US wholesale prices in August reflect the biggest jump in energy costs since January, while underlying inflation remained contained, a Labour Department report showed yesterday in Washington.

Producer Price Index (PPI) rose 0.2% month-onmonth (MoM) (est. 0.3% rise) after 0.1% drop the previous month. PPI rose 2.4% year-on-year (YoY) after 1.9% gain in prior 12-month period. Excluding food and energy, core gauge rose 0.1% MoM, up 2% YoY.

About three-fourths of the monthly gain in the headline gauge came from goods, most of which was due to a 9.5% jump in petrol, along with the biggest rise in jet-fuel costs since 2009. Since the PPI pricing date was Aug 15, the data shouldn’t have captured the effects of Hurricane Harvey, said Scott Sager, a Bureau of Labour Statistics economist.

The PPI excluding food, energy and trade services, a measure some economists prefer because it strips out the most volatile components, rose 1.9% from August 2016, the same as the prior month. That indicates broader inflation is taking time to pick up.

Price pressures in the production pipeline are still relatively contained, helping keep the US Federal Reserve’s preferred consumer-price measure below its goal and one reason why policymakers plan to raise borrowing costs only gradually. Central bankers will update their interest-rate forecasts next week, indicating whether the chances of a December hike have ebbed.

The history of hurricanes such as Katrina indicates inflation measures could remain elevated for a few months, economists said.

Excluding the volatile categories of food, energy and trade services, producer costs rose 0.2% from the previous month following no change. Energy prices rose 3.3% from the prior month, most since January; food costs fell 1.3%, biggest drop since February 2015, as wheat plunged 20.6%, most in nine years. Goods prices rose 0.5% after falling 0.1% in July. — Bloomberg