Northwest Arkansas Democrat-Gazette
Producer price index falls 0.3%
Report on wholesale costs indicates low U.S. inflation rates
WASHINGTON — U.S. producer prices fell in September, another sign that inflation remains tame more than 10 years into America’s economic expansion.
The Labor Department says its producer price index, which measures inflation before it reaches consumers, fell 0.3% last month, the first drop since June and the biggest since January. Even core wholesale prices, which exclude volatile food and energy prices, tumbled 0.3%.
Producer prices excluding food, energy, and trade services — a measure preferred by some economists because it strips out the most volatile components — were unchanged from the prior month, and rose 1.7% from a year earlier.
Falling prices were widespread.
The cost of goods fell 0.4% after dropping 0.5% the previous month. Services prices decreased 0.2% after a 0.3% gain in August.
Energy prices fell 2.5% from the prior month, dragging down the overall gauge, and food costs rose 0.3%.
Over the past year, producer prices have risen 1.4%, and core producer prices are up 2%.
The report, which measures wholesale and other business selling costs, reflected monthly declines in indexes for machinery and vehicle wholesaling, as well as fuels and apparel retailing. Transportation and warehousing prices also dropped, while the index for hospital outpatient care increased.
The U.S.-China trade war intensified in September when a new 15% tariff on about $112 billion of Chinese products took effect. This levy, along with the batch that would affect about $160 billion worth of goods starting in mid-December, more directly targets American consumers.
Analysts monitor the producer price index to assess potential price pressures set to show up at the consumer level. A more closely watched measure of inflation — the core consumer price index — is forecast to have risen 2.4% from a year earlier, which would equal the August reading.
The drop in the core index suggests weaker demand is forcing companies to lower prices and preventing them from passing along any higher costs resulting from tariffs. Subdued inflation provides space for the Federal Reserve to lower borrowing costs with little concern that price gains will surpass the central bank’s goal.
President Donald Trump has repeatedly pressured the Fed to lower U.S. interest rates, arguing that inflation poses no threat even though unemployment is at a 50-year low of 3.5%. The Fed has already cut rates twice this year. Policymakers next meet Oct. 29-30.