U.S. Wholesale Prices Were Little Changed on Cheaper Food, Fuel

(Bloomberg) -- Wholesale prices in the U.S. were little changed in August, held back by a second straight month of lower costs for food and fuel.

No change in the producer-price index followed a 0.4 percent decline the prior month that was the steepest pullback in nearly a year, a Labor Department report showed Thursday in Washington.

Price pressures in the production pipeline have yet to show a sustained build, especially for goods, which are more exposed than services to global headwinds. Inflation continues to stay below the goal of Federal Reserve officials, who are meeting next week to consider whether to lift interest rates.

The median forecast of economists surveyed by Bloomberg called for a 0.1 percent rise. Projections ranged from a drop of

0.2 percent to an advance of 0.3 percent.

From a year earlier, producer prices were also unchanged after a 0.2 percent decrease in the prior 12-month period.

The details of the producer price report reflected a 0.8 percent month-over-month decline in energy costs and a 1.6 percent decrease in food.

Excluding food and energy, wholesale prices rose 0.1 percent from the previous month following a 0.3 percent drop. Those costs were up 1 percent from August 2015.

The report also showed that profit margins at machinery and equipment wholesalers dropped by a record 2.9 percent in August. Margins also shrank at fuel and chemical service providers.

Excluding volatile components such as food, energy, and also eliminating trade services, producer costs increased 0.3 percent after little change the previous month. Some economists prefer this reading because it strips out the most volatile components of PPI.

Compared with a year earlier, this core measure advanced

1.2 percent, the most since December 2014.

One important takeaway from the results was the increase in health-care prices that are used to calculate the Commerce Department’s consumer spending inflation index, the Fed’s preferred price measure. Those costs rose 0.4 percent in August before adjusting for seasonal variations, from the prior month. They were up 1.6 percent from August 2015.

The producer price gauge is one of three monthly inflation reports released by the Labor Department, the other two being import costs and consumer prices.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net.

To contact the editor responsible for this story: Scott Lanman or slanman@bloomberg.net, Vince Golle