U.S. producer prices rise 5.4% in August
U.S. producer prices rose 5.4% year over year in August, above the 5.3% expected and up from 4.8% in July. The monthly PPI also accelerated to 0.4% from 0.1%, versus 0.3% consensus, while core PPI rose 0.2% on the month and 4.6% year over year.
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U.S. producer prices rose 5.4% year over year in August, above the 5.3% economists expected and up from 4.8% in July, Labor Department data showed Thursday. On a monthly basis, the headline producer price index increased 0.4% after 0.1% in July, versus a 0.3% consensus. Core PPI rose 0.2% on the month, below the 0.3% expected, and the annual core rate climbed to 4.6% from 4.3%.
PPI excluding food, energy and trade services rose 0.3% month over month and 4.7% year over year, compared with 0.4% and 4.7% previously. Ahead of the report, Fed futures priced a 62% chance of a rate hike at the Fed’s meeting next week. Final demand goods prices increased 1.1% in August after two straight declines, with more than three-quarters of the rise linked to final demand energy, which jumped 4.2%. Diesel fuel rose 24.1% on the month and accounted for more than a third of the goods increase.
Final demand services edged up 0.1%. Transportation and warehousing prices rose 2.3%, driven by fuel costs, while truck freight increased 2.0% and trade prices were unchanged. Services margins fell 0.2%, while the cleanest measure of underlying services inflation — final demand services less trade, transportation and warehousing — was unchanged in August. Portfolio management prices, which feed into the Fed’s preferred PCE gauge, moved lower.
Equities extended their losses in the minutes after the release. By 8:39 a.m. ET, the S&P 500 was down 0.5% at 7,611, the Nasdaq 100 fell 0.8% to 29,080, the Dow slipped 0.5% to 52,294 and the Russell 2000 lost 0.6% to 2,904. The two-year Treasury yield, the maturity most sensitive to Fed policy, jumped about 5 basis points to 4.50%, its sharpest move of the session.
The U.S. dollar index rose 0.3% to 98.91. Gold, tracked by the SPDR Gold Shares (NYSE: GLD), dropped 1.1% to $4,340 an ounce as a firmer dollar and higher front-end yields weighed on the metal. WTI crude moved above $100 a barrel, rising 3.2% to $100.60.
Before the report, Fed futures had priced a 62% chance of a rate hike at next week’s meeting. Chances of a 25-basis-point rate hike next week climbed to 66% after the hotter-than-expected PPI report. Polymarket currently puts the odds of a rate hike at 54%.