US producer prices rose 0.4% in August, keeping inflation firmly in the Fed’s way just days before its September policy meeting.
The annual PPI rate accelerated to 5.4% from 4.8% in July, while core prices excluding food and energy rose a softer 0.2% for the month. Energy drove much of the headline increase, while underlying price pressures were more restrained.
Energy drove the August increase
Energy prices jumped 4.2% in August after falling for two straight months, as renewed US-Iran hostilities pushed oil prices higher. Wholesale food prices edged up just 0.1%.
Goods prices climbed 1.1%, compared with a 0.1% increase for services, putting the latest inflation pressure squarely on the goods side of the economy.
Diesel was one of the biggest movers, with prices surging 24.1% during the month.
Processed goods prices rose 1.8%, while unprocessed goods increased 1.1%, adding to signs that businesses are facing higher costs earlier in the supply chain.
Electronic component prices climbed 3.4% in August and 27.6% from a year earlier as AI infrastructure demand kept pressure on supplies.
The Fed faces a tighter decision
The report lands less than a week before the Fed’s September 15-16 meeting, with inflation still running hot enough to keep another rate increase in play. Markets had priced in roughly a 62% chance of a quarter-point September hike ahead of the PPI release.
“We’ll have less confidence than usual.”
Lou Crandall, Wrightson ICAP
The next test comes with consumer inflation. If energy remains the main source of pressure and core consumer inflation stays contained, the Fed has more room to wait. A hotter core reading would make that decision harder.