WASHINGTON. – US producer prices increased more than expected in September, but underlying goods prices posted their weakest reading in nearly 2-1/2 years as supply chains improved further, offering some hope in the battle against inflation.
The report from the Labor Department on Wednesday also suggested that producers could be struggling to pass on higher prices, with a measure of changes in margins received by wholesalers and retailers barely rising last month. Prices for intermediate goods and services also increased moderately.
“Inflation is all about pass-through costs at the lower level of production, so this report counts as some relief for beleaguered consumers who face runaway inflation on the goods sitting on store shelves,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
“The Fed’s war on inflation hasn’t been won yet, but at least the costs of goods at the producer level have stopped rising at a rate that looked out of control earlier this year.”
The producer price index for final demand rebounded 0.4 percent last month. Data for August was revised lower to show the PPI falling 0.2 percent instead of dipping 0.1 percent as previously reported. Economists polled by Reuters had forecast the PPI rising 0.2 percent.
A 0.4 percent rise in the price of services accounted for two-thirds of the increase in the PPI in September. Services climbed 0.3 percent in August. More than a quarter of the rise in September was driven by a 6.4 percent surge in hotel and motel accommodation prices.
There were also increases in the costs of food and alcohol retailing, portfolio management, machinery and vehicle wholesaling, oil and gas well drilling services as well as hospital inpatient care. But prices for long-distance freight fell, as did fuels and lubricants retailing and consumer loans.
Prices for transportation and warehousing services slipped 0.2 percent, falling for a third straight month and also benefiting from the loosening of bottlenecks in supply chains.
Margins for final demand trade services edged up 0.1 percent.
Goods prices increased 0.4 percent after declining 1.1 percent in August. A 1.2 percent jump in the price of food accounted for 60 percent of the increase in goods. Food prices were boosted by a 15.7 percent surge in the cost of fresh and dry vegetables. There were also increases in the prices for pork and chicken eggs. – Reuters
