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US producer prices in September rose 0.4%, more than expected

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A worker assembles soccer balls at the Wilson Sporting Goods facility in Ada, Ohio on Thursday, September 3, 2020.

Maddie McGarvey | Bloomberg | Getty Images

Producer prices in the United States rose more than expected in September amid skyrocketing hotel and motel costs, leading to the first year-over-year increase since March.

Wednesday’s Department of Labor report, which also showed higher prices for scrap iron and steel, suggested that a slowdown in inflation signaled by Tuesday’s data would likely be moderate. Consumer prices slowed in September as supply chain disruptions caused by the COVID-19 pandemic abated.

The producer price index for final demand rose 0.4% last month after advancing 0.3% in August. In the 12 months to September, the PPI rose 0.4% after falling 0.2% in August.

Economists polled by Reuters had forecast the PPI to gain 0.2% in September and rebound 0.2% on an annual basis.

Excluding the volatile components of food, energy and commercial services, producer prices rose 0.4% in September. The so-called core PPI had risen 0.3% for three consecutive months. In the 12 months to September, the core PPI climbed 0.7%. Core PPI rose 0.3% year on year in August.

US stock index futures were trading slightly higher. The dollar slipped against a basket of currencies. The prices of the US Treasury were mostly higher.

The government said on Tuesday that consumer prices rose 0.2% in September, with a 6.7% rise in prices for used cars and trucks accounting for most of the increase.

Business closures to slow the spread of the coronavirus have created bottlenecks in the supply chain, pushing up prices for some products. Many businesses are now operational, but excess capacity in the labor market limits their ability to raise prices.

Tame inflation should allow the Federal Reserve to keep interest rates close to zero for a while and continue to pump money into the economy, which entered recession in February.

The US central bank is now focusing more on the labor market and has adopted flexible targeting of average inflation, which in theory could allow policymakers to tolerate price increases above the 2% target. Fed for a period of perhaps several years to compensate for the years in which inflation was introduced. below this target.

The Fed’s preferred measure of inflation, the Personal Consumption Expenditure Price Index (PCE), rose 1.6% in the 12 months of August. The core data for the PCE price index for September is expected to be released at the end of this month.

With the spike in new coronavirus infections in the United States and the economic recovery showing signs of stress, inflation could remain lukewarm. At least 25.5 million people receive unemployment benefits.

In September, services rose 0.4% after increasing 0.5% in August. A 3.9% jump in hotel and motel accommodation was a major driver of the rise in prices for services last month. There have also been increases in the costs of equipment, building materials and supplies, transportation and hospital care.

Whole food prices rebounded 1.2% after three consecutive monthly declines. Wholesale gasoline prices fell 2.8%. Goods prices accelerated 0.4% after edging up 0.1%. The prices of goods were driven by a 14.7% surge in prices for scrap iron and steel.

Excluding food and energy, goods prices rose 0.4% after rising 0.3% in August. The dollar has fallen 2.8% against the currencies of the United States’ major trading partners since July.

This story is developing. Please come back for updates.

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