August 2017 Producer Price Index

Prices paid by producers and wholesalers rose 0.2 percent in August 2017. This most recent release followed a slight decline a month earlier and an increase of 0.1 percent in June. Versus a year ago, the Bureau of Labor Statistics’ Producer Price Index was 2.4 percent higher, accelerating from 1.9 percent in July.

Goods led the headline tally higher, but services increased as well. Prices for final demand goods rose 0.5 percent during the month. More specifically, energy was up 3.3 percent while foods were down 1.3 percent; all other goods were 0.2 percent higher. Services’ uptick was much more modest, rising just 0.1 percent.

Prices for earlier stages of output were mixed. Processed goods for intermediate demand rose 0.4 percent in August and increased 4.1 percent in the past year. Processed materials excluding food and energy contributed over 60 percent of this monthly uptick. Unprocessed goods for intermediate demand fell 0.7 percent and are 6.8 percent higher on a year-over-year basis; the monthly decline is due in part to a 5.2 percent drop for unprocessed foodstuffs and feedstuffs. Services for intermediate demand were up 0.2 percent after falling 0.3 percent in July; this category is up 2.6 percent in the past year.

The twelve-month trend for prices paid by producers and wholesalers accelerated for the first time since April of this year. However, more time is needed to know if our economy has entered a new period of hastening inflation. In the meantime, the Federal Reserve was probably pleased with the trend’s uptick since they have been struggling to push inflation higher while simultaneously flirting with the idea of continuing their overnight interest rate increases, an action usually considered an inflation dampener.