U.S. producer prices unexpectedly fell 0.1% in August

By PAUL WISEMAN, Associated Press Economics Writer

WASHINGTON (AP) — U.S. producer prices fell unexpectedly last month, dropping 0.1% from July.

The Labor Department reported Wednesday that its producer price index — which captures inflation in the supply chain before it hits consumers — showed that wholesale inflation decelerated in August after advancing 0.7% in July. Wholesale services prices fell 0.2% from July on smaller profit margins at retailers and wholesalers, which might be a sign that those companies are absorbing the cost of President Donald Trump’s sweeping taxes on imports.

Compared to a year earlier, producer prices rose 2.6%.

Excluding volatile food and energy prices, so-called core producer prices also fell 0.1% from July and were up 2.8% from a year earlier.

The numbers were lower than economists had forecast.

The wholesale price report came out day before the Labor Department releases its consumer price index. The CPI is expected to show that consumer price inflation picked up slightly last month, rising 0.3% from July, an uptick from a 0.2% increase the month before. Compared with a year earlier, consumer prices are expected to have risen 2.9% in August, up from a 2.7% year-over-year increase in July.

Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably measures of health care and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, price index.