U.S. Producer Prices Increased More Than Forecast in August

(Bloomberg) -- Prices paid to U.S. producers rose in August by more than forecast, indicating a rebound in demand from the pandemic-related lockdowns is gradually restoring pricing power.

The producer-price index increased 0.3% from a month earlier after a 0.6% gain in July, Labor Department figures showed Thursday. A Bloomberg survey of economists projected a 0.2% advance. The PPI fell 0.2% from a year earlier, the smallest decline in five months.

Excluding volatile food and energy components, the so-called core PPI rose 0.4% from a month earlier and was up 0.6% from August 2019. The median forecast called for a 0.2% month-over-month increase and a 0.3% rise from a year earlier.

The figures signal producers are becoming slightly more successful passing along higher raw materials costs to their customers. While recent data have shown an acceleration in consumer prices, returning inflation to the Federal Reserve 2% target will likely be a slow process.

On Friday, the Labor Department will issue its August report on consumer prices, and the median forecast calls for a 1.2% year-over-year increase.

Producer prices excluding food, energy, and trade services -- a measure preferred by economists because it strips out the most volatile components -- rose 0.3% for a third straight month and was up 0.3% from a year earlier, the largest annual gain since March.

The cost of goods rose just 0.1% from a month earlier, held back by a third straight decline in food prices and a drop in energy. Excluding food and fuel, goods prices rose 0.3% for a second month.

The index for final demand services increased 0.5% for a second month. The agency said that two-thirds of the advance was due to a 1.2% rise in margins received by wholesalers and retailers.

©2020 Bloomberg L.P.