Core producer prices rose 0.2 percent in August, coming in below the 0.3 percent Wall Street had forecast and slower than the previous month’s revised 0.3 percent gain, according to new government data.
The headline producer price index, which includes food and energy, rose 0.4 percent, matching economists’ expectations after climbing an upwardly revised 0.1 percent in July. Higher fuel prices have kept pushing that headline number up since the war with Iran began.
Compared with a year ago, overall producer prices are up 5.4 percent, higher than July’s 4.8 percent annual pace and above the 5.3 percent consensus. Core prices, which strip out food and energy, are up 4.6 percent over the past 12 months, in line with forecasts but above July’s 4.2 percent reading.
Energy Costs Still Surging
Energy is where the real pain shows up. Prices rose 4.2 percent in August alone and are up 24.4 percent over the past year. Consumer energy goods rose 2.8 percent for the month and 20.8 percent for the year. Energy bought by government agencies jumped 9 percent monthly and 36.7 percent annually. Export energy prices climbed 8 percent in August and 40.7 percent year-over-year.
Diesel fuel is the standout number: up 24.1 percent in a single month and 77.8 percent over the past year. Gasoline rose 4.2 percent from July and is up 46.5 percent from a year ago. Home heating oil spiked 22.8 percent month-to-month and is up a staggering 89.9 percent from last August.
There was one bright spot. Residential electricity prices fell 0.5 percent in August, though they’re still up 3.2 percent for the year. Residential natural gas dipped 0.1 percent and is up 4.6 percent annually.
Transportation Costs Feeling the Squeeze
The broader goods index rose 1.1 percent in August after two straight monthly declines, with more than three-quarters of that increase driven by energy and over a third tied to diesel prices alone.
Transportation and warehousing of consumer goods rose 1.7 percent, transportation of capital equipment rose 1.8 percent, and passenger transportation jumped 4.1 percent. Combined, transportation and warehousing costs rose 2.3 percent.
Services prices edged up just 0.1 percent, the third straight monthly increase, driven almost entirely by transportation and warehousing. Strip that category out, and services prices were flat.
What the Number Measures
The producer price index tracks prices paid to American businesses for goods and services sold to consumers, households, other businesses, and foreign buyers — a wider net than the consumer price index casts. Despite the old “wholesale prices” label, it isn’t a measure of wholesale pricing. The headline figure reflects sales to end-users, not the inputs that go into making other goods. It leaves out import prices, since those aren’t paid to U.S. producers, but does include export prices, which CPI excludes.
Bottom line: the topline inflation numbers came in roughly as expected, but Americans buying fuel, heating their homes, or paying for freight and travel are still absorbing sharp year-over-year cost increases that show no sign of reversing.
