US wholesale inflation, jobless claims tick up
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The news: US producer prices rose 0.2% in August while jobless claims increased slightly, reinforcing expectations for a 25-basis point rate cut from the Federal Reserve next week.
The numbers: The PPI move was larger than the 0.1% rise expected by economists polled by Reuters. It was largely driven by trade services, the Bureau of Labor Statistics said, as the index for goods prices was unchanged during the month.
Core PPI, which excludes volatile food and energy categories, climbed 0.3%, the same as in July, signalling subdued inflationary pressures. The year-on-year move was 3.3%.
Overall, wholesale prices were unchanged in July and rose 0.2% in June. On an annual basis, the broader PPI moved 1.7% in August.
Meanwhile, a separate report by the Labor Department showed applications for US unemployment benefits ticked up to 230,000, a marginal increase of 2,000 claims but the first increase in three weeks.
The total number was in line with expectations from economists polled by Reuters and is consistent with a gradual slowdown in hiring.
The context: Both the PPI and jobless claims data are consistent with the trend of mild but easing inflation and an orderly slowdown of the labour market.
Categories feeding into the Fed’s preferred inflation gauge, the personal consumption expenditure price index – were muted, including physician care and hospital inpatient care costs.
Wall Street responded with muted changes, as the data didn’t move expectations of a 25-basis point rate cut on 18 September.
What they said: “The August PPI data provide more encouragement for the Fed that inflation has been tamed,” Paul Ashworth, chief North America economist at Capital Economics, said in a note.
“The Fed can have greater confidence now that inflation has been tamed, but with housing cost inflation refusing to roll over, the bar to cutting interest rates aggressively remains quite high.”
The sources: US Bureau of Labor Statistics , Department of Labor
