Wholesale prices were steady in September, the Labor Department said, in a July report. And that translates to further edging improvement than in the prior month when wholesale prices rose by 0.2%. This is a yearly increase of 1.8%, the PPI report shows. Economists, according to a Dow Jones survey, had predicted modestly higher wholesale prices for the month with an increase of 0.1%.
Excluding volatile food and energy prices, the PPI rose by 0.2%, a number that corresponds to expectations as well as marking an increase of 2.8% to the same month last year. The report comes on the heels of another Labor Department release which said the Consumer Price Index rose by 0.2% for the month and 2.4% year-over-year.
Markets responded relatively calmly to the report, with stock futures indicating a marginal gain for Wall Street and yields for long-term securities climbed. The Dow Jones Industrial Average has risen by over 300 points since the banks reported their strong earnings.
The data indicate that inflation is no longer rising at the rapid pace seen over the last two years, though it is still above the target of the Federal Reserve, standing at 2%. Neither of the PPI nor the CPI is of prime importance to the Fed in its key inflation measures, but they each play a role in the preferred personal consumption expenditures price index of policymakers. Economists anticipate that the PCE deflator, released later this month, will rise 0.2% or slightly higher.
Oren Klachkin, an economist at Nationwide Financial, who covers markets, commented, “The latest PPI and CPI didn’t seem to get in the way of the disinflation story, yet they are a reminder that the journey to 2% isn’t going to be easy.”
The University of Michigan Consumer Sentiment Survey of October revealed that its index fell by 4% compared with the reasons behind declining sentiment, yet near-term inflation expectations rose 2.9%, the most since June.
PPI points to a 0.2% decline in the goods portion of final demand, offset by a 0.2% rise in services. But it is worth noting on its own account, a lot of input comes from a 3% pickup in deposit services costs that helped drive the uptick in the services index, while significant drops in energy prices, of which gasoline and diesel are particularly high, drove the goods index.
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