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Economic Report: U.S. core producer prices rise at slower pace in August

The numbers: The U.S. producer price index rose 0.7% in August, the Labor Department said Friday. That’s down from a 1% jump in July.

Economists polled by The Wall Street Journal had forecast a 0.6% advance.

The core producer price index, which excludes volatile food and energy prices, rose 0.3% in August, down from a 0.9% gain in the prior month.

Overall producer prices are up 8.3% in August from a year earlier though, up from 7.8% in the prior month. That’s the largest gain since the data was first collected in November 2010.

Core prices are up 6.3% from a year earlier, up from 6.1% in July. That’s the largest gain since the data was first calculated in August 2014.

Big picture: Inflation remains well above the Federal Reserve’s 2% annual target. Economists are starting to talk about price rises peaking in the wholesale sector. The PPI index had risen an average of 0.9% monthly over the first seven months of the year.

Producers are still struggling with shortages, bottlenecks and transportation woes. in the wake of the coronavirus pandemic. These factors could continue to put upward pressure on wholesale prices.

Key details: The cost of goods rose 1% in August after a 0.6% gain in the prior month. A jump in meat prices led the gains.

The cost of services rose 1.5% last month, down slightly from 1.7% in July. The gain was led by health, beauty and optical goods prices.

Energy prices only rose 0.4% in August, down sharply from a 2.6% gain in the month before, reflecting a drop in crude oil prices.

Wholesale food prices jumped 2.9% after a 2.1% decline in July.

What are they saying: “Over the next few months, the shift of consumer spending back to services—spending on travel, entertainment, and restaurants—and away from goods will relieve the stress on supply chains and further cool inflation,” said Bill Adams, senior economist at PNC Financial Services.

Market reaction: Stocks
SPX,
+0.05%

DJIA,
-0.17%

are expected to open higher on Friday after President Joe Biden took a firm tone urging Americans to get vaccinated.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.325%

rose 2 basis points to 1.32%.

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