US whole­sale in­fla­tion re­mains tame in Au­gust House­hold in­come fi­nally topped 1999 peak last year

Kuwait Times - - BUSINESS -

A jump in fuel prices helped nudge US whole­sale in­fla­tion in Au­gust to its big­gest gain in four months, the La­bor Depart­ment re­ported yes­ter­day. But de­spite re­vers­ing the drop seen in July, the Pro­ducer Price In­dex still fell short of an­a­lyst ex­pec­ta­tions. Although the fuel price in­dex spiked last month, it was not af­fected by Hur­ri­cane Har­vey, since the in­for­ma­tion used to cal­cu­late the in­crease was col­lected be­fore the storm hit. But the storm im­pact likely will be felt in Septem­ber.

Har­vey made land­fall to­ward the end of the month on the Texas Gulf Coast, shut­ting down a large share of US pro­duc­tion and re­fin­ing ca­pac­ity, which hit fuel and crude prices. “We are braced for a PPI spike in the next cou­ple of months,” Ian Shep­herd­son of Pan­theon Macroe­co­nomics wrote in a client note. He noted that core PPI rose 0.5 per­cent in the im­me­di­ate af­ter­math of Su­per­storm Sandy in 2012. To­tal PPI, which tracks the costs of whole­sale goods and ser­vices, rose 0.2 per­cent for the month, the La­bor Depart­ment said, fall­ing short of the 0.3 per­cent rise an­a­lysts had been ex­pect­ing. The in­crease fol­lowed a 0.1 per­cent drop in the prior month, and was the largest since a gain of 0.5 per­cent in April. Year-over-year, the in­dex was 2.4 per­cent higher, up five tenths from July.

Most of the Au­gust PPI in­crease came from the goods seg­ment, in­clud­ing en­ergy, which jumped 3.3 per­cent. Ex­clud­ing the volatile food and fuel cat­e­gories, “core” PPI rose 0.1 per­cent, also be­low ex­pec­ta­tions, and was up 2.0 per­cent com­pared to Au­gust 2016.

Within en­ergy, there were dou­ble-digit monthly in­creases in resid­ual fu­els, home heat­ing oil, and jet fuel, which rose 18.6 per­cent, its fastest pace in eight years. And whole­sale gaso­line prices rose 9.5 per­cent for the month, the big­gest in­crease since Jan­uary. An­a­lysts said the Fed was likely to view ris­ing en­ergy prices as a tem­po­rary phe­nom­e­non but re­con­struc­tion af­ter back-to-back hur­ri­canes in Texas and Florida was likely to drive up de­mand and prices for con­struc­tion and other ser­vices. Per­sis­tent weak US in­fla­tion has stumped mon­e­tary pol­i­cy­mak­ers and econ­o­mists this year. The Fed­eral Re­serve is ex­pected to leave its bench­mark in­ter­est rate un­touched when they meet next week, and the like­li­hood of a third rate hike this year has re­ceded, es­pe­cially in the af­ter­math of the hur­ri­canes.

In con­trast to en­ergy, food prices dragged the monthly in­dex down, with whole­sale wheat prices tum­bling 20.6 per­cent, the largest drop in more than nine years. Air trans­porta­tion ser­vices rose 1.4 per­cent, the big­gest in­crease since July 2009, while truck haul­ing ser­vices moved up 0.9 per­cent, the largest in­crease in three years.

In a stark re­minder of the dam­age done by the Great Re­ces­sion and of the mod­est re­cov­ery that fol­lowed, the me­dian Amer­i­can house­hold only last year fi­nally earned more than it did in 1999. In­comes for a typ­i­cal US house­hold, ad­justed for in­fla­tion, rose 3.2 per­cent from 2015 to 2016 to $59,039, the Cen­sus Bu­reau said. The me­dian is the point at which half the house­holds fall be­low and half are above. Last year’s fig­ure is slightly above the pre­vi­ous peak of $58,665, reached in 1999. It is also the first time since the re­ces­sion ended in 2009 that the typ­i­cal house­hold earned more than it did in 2007, when the re­ces­sion be­gan. Trudi Ren­wick, the bu­reau’s as­sis­tant di­vi­sion chief, cau­tioned that the cen­sus in 2013 changed how it asks house­holds about in­come, mak­ing his­tor­i­cal com­par­isons less than pre­cise. Still, the Cen­sus data is closely watched be­cause of its com­pre­hen­sive na­ture. It is based on in­ter­views with 70,000 house­holds and in­cludes de­tailed data on in­comes and poverty across a range of de­mo­graphic groups. Elise Gould, a se­nior econ­o­mist at the Eco­nomic Pol­icy Institute, said that ad­just­ing for the change in method­ol­ogy, me­dian in­come still re­mains be­low its 1999 peak. Yet she added that the cen­sus re­port shows that Amer­i­can house­holds have made sig­nif­i­cant eco­nomic progress in 2015 and 2016.

“We are def­i­nitely pulling our­selves out of the deep hole of the Great Re­ces­sion,” Gould said on a con­fer­ence call with re­porters. Me­dian house­hold in­come rose $4,641, or 8.5 per­cent, from 2014 through 2016. That’s the best two-year gain on records dat­ing to 1967, ac­cord­ing to an­a­lysts at the Cen­ter on Bud­get and Pol­icy Pri­or­i­ties. Yet that im­prove­ment comes af­ter a steep re­ces­sion and a slow re­cov­ery that left most Amer­i­can house­holds with barely any in­come in­creases. The lack of mean­ing­ful raises has left many peo­ple feel­ing left be­hind eco­nom­i­cally, a sen­ti­ment that fac­tored into the 2016 elec­tions. The re­port also showed that in­come in­equal­ity wors­ened last year, ex­tend­ing a trend in place for roughly four decades. Av­er­age in­comes among the wealth­i­est 5 per­cent climbed 5.5 per­cent to $375,088. Av­er­age in­comes for the poor­est one-fifth of house­holds, mean­while rose 2.5 per­cent to $12,943.

Other mea­sures of Amer­i­cans’ eco­nomic health im­proved. The poverty rate fell last year to 12.7 per­cent from 13.5 per­cent, Cen­sus said. The num­ber of peo­ple liv­ing be­low the poverty line de­clined 2.5 mil­lion to 40.6 mil­lion. — Agen­cies

DIXON: So­lar tech Joshua Valdez (left) and se­nior plant man­ager Tim Wis­dom walk past so­lar pan­els at a Pa­cific Gas and Elec­tric So­lar Plant, in Dixon, Calif. Higher en­ergy costs led to prices at the whole­sale level ris­ing in Au­gust 2017 at the fastest pace in four months, ac­cord­ing to in­for­ma­tion re­leased yes­ter­day.—AP

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