US producer price gains slow but up on the month

US producer price gains slowed in September from a year earlier, but posted a greater-than-expected monthly gain on higher service costs.

The producer price index (PPI), which tracks the prices producers receive for goods, services and construction, rose by 8.5pc in September, slowing from an 8.7pc annual gain in the 12 months through August, the Bureau of Labor Statistics reported. It peaked at 11.7pc in March.

The PPI rose by a seasonally adjusted 0.4pc in September from the prior month, after monthly declines of 0.2pc in August and 0.4pc in July. The PPI peaked at a monthly 1.7pc gain in March.

Two-thirds of the latest monthly gain was due to gains in service costs, much of them gains in traveler accommodation services.

The PPI energy index rose by 0.7pc on the month after falling by 5.6pc in August. The energy index was up 24.2pc on the year. The food index was up 1.2pc on the month, surging from a 0.1pc decline the prior month.

The Federal Reserve is engaged in its steepest course of rate hikes since the 1980's as it tries to bring down inflation from four-decade highs brought on by the war in Ukraine, snarled supply chains and surging demand after Covid-19 shutdowns. Still, the latest move by Opec+ countries to cut crude output quotas by 2mn b/d means higher energy inflation pressures are in the pipeline. US gasoline prices have been rising at the pump for three weeks.

The index for final demand less food, energy and trade services — considered core PPI — advanced by 5.6pc on the year for a second month, slowing from prior months after peaking at 7.1pc in March. Still, on a monthly basis, it rose by 0.4pc in September following a 0.2pc gain the prior month and the largest monthly gain since 0.5pc in May.

The PPI report comes out a day before tomorrow's consumer price index (CPI) report — a measurement of what consumers pay for a basket of different goods and finished products — which is forecast to come in at about 8pc after a 8.3pc gain in August. PPI inflation often shows up in CPI numbers, as businesses generally pass on their costs to consumers.

By Robert Willis