Wages may have shown inflationary pressures in last week's employment
report but prices at the base of the supply chain remain very subdued.
Headline producer prices edged 0.1 percent lower in August as did the
ex-food and ex-energy reading with ex-food, ex-energy and ex-trade
services up only 0.1 percent. All of these readings are either at or
below the low end of Econoday's consensus ranges.
Foods fell 0.6
percent in the month to outmatch a 0.4 rise in energy. Trade service
prices posted a very sharp decline of 0.9 percent that follows a 0.8
percent drop in July. Year-on-year, this reading is only 0.8 percent
higher and points to a reversal of pressures earlier this year at
retailers and wholesalers.
Other readings include only a 0.1
percent rise in construction prices that belies complaints out of the
sector over rising costs. Passenger cars did show pressure, up 0.7
percent in the month, but not light trucks which slipped 0.1 percent.
Personal consumption measures, which offer hints at the next set of PCE
price data, are flat, unchanged overall and also when excluding food and
energy.
Tariff-impacted areas do continue to show pressure with
steel mill products up 2.6 percent in August for a year-on-year
increase of 18.6 percent, though aluminum mill shapes declined, down 2.1
percent on the month but still up 14.0 percent on the year. Fabricated
metal products rose 2.2 percent in August for a yearly gain of 15.7
percent.
But metals aside, this report is remarkably benign and
includes outright retreats in the overall year-on-year rate, down 5
tenths overall to 2.8 percent and down 4 tenths less food and energy to
2.3 percent. Today's results will not raise any concerns over tomorrow's
consumer price report where only a 0.2 percent rise in the core rate is
expected. Risks over inflation appear to be concentrated in the labor
market and not the general economy, at least yet.
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