Producer Price Index Falls in August as Wholesale Inflation Cools

Wholesale inflation in the United States eased in August. The Producer Price Index (PPI) for final demand slipped 0.1% from the prior month, according to the Bureau of Labor Statistics. This was the first decline in four months and weaker than the 0.3% rise expected by economists.

The drop followed a revised 0.7% increase in July. On an annual basis, PPI climbed 2.6%, slower than July’s 3.1% and well below forecasts of 3.3%. The decline signals some relief in cost pressures for businesses and could influence future monetary policy decisions.

Producer Price Index Details Show Weakness in Core Inflation

Core PPI, which excludes food and energy, also dipped 0.1% in August. That reversed a 0.7% increase in July. Analysts had predicted a 0.3% rise. Year-over-year, core PPI slowed to 2.8% from 3.4% the previous month. Reuters noted this was the weakest annual pace since early 2024.

The report showed services drove the August weakness, with final demand services falling 0.2%. Goods prices, in contrast, edged up 0.1%. Prices for final demand less food, energy, and trade services advanced 0.3%, extending a four-month streak of increases. That measure was up 2.8% over the year, its highest reading since March.

Finished Goods Index and Consumer Price Link

The legacy finished goods index also highlighted mixed results. Headline PPI for finished goods rose 0.1% in August, down from 0.4% in July. Year-over-year, the index eased to 1.9%. Core finished goods PPI gained 0.3% for the month, steady at 2.8% annually.

The Producer Price Index often moves ahead of consumer inflation. Rising producer costs can pass through to households, but that link is not always firm. During past downturns, businesses absorbed more costs instead of raising prices. This makes PPI more volatile than the Consumer Price Index (CPI).

The Producer Price Index decline in August marks a turning point. Wholesale inflation eased after months of gains. Analysts will watch if this leads consumer prices lower in the months ahead.

FYI (keeping you in the loop)-

Q1: What is the Producer Price Index?

The Producer Price Index measures average changes in prices that domestic producers receive for their goods and services. It reflects wholesale inflation.

Q2: Why did the PPI fall in August?

The decline was led by lower prices for services. Goods prices rose slightly, but services dragged the index lower overall.

Q3: How does PPI compare with CPI?

PPI tracks price changes at the producer level. CPI measures changes at the consumer level. PPI is often seen as a leading indicator for CPI.

Q4: What was core PPI in August?

Core PPI, which excludes food and energy, fell 0.1% month-over-month and rose 2.8% year-over-year. This marked a slowdown from July.

Q5: What is the finished goods index?

The finished goods index is a legacy measure of producer prices. It remains closely tracked and showed a small monthly gain of 0.1% in August.