A measure of wholesale prices showed no change in September, indicating a continued easing in inflation, according to a report by the Labor Department on Friday. The producer price index, which gauges what producers receive for their goods and services, remained steady for the month and increased by 1.8% from a year earlier. Economists surveyed by Dow Jones had anticipated a monthly increase of 0.1% following August’s 0.2% rise.
Excluding food and energy, the PPI increased by 0.2%, meeting expectations, and rose by 2.8% from a year ago. The report was released a day after the Labor Department announced that the consumer price index, a widely tracked inflation measure reflecting what consumers pay for goods and services, rose by 0.2% for the month and 2.4% from a year earlier.
The market response to the data was muted, with futures slightly up on Wall Street and Treasury yields increasing for longer-duration securities. Stocks later rose, with the Dow Jones Industrial Average gaining over 300 points following strong bank earnings reports.
Both reports suggest that inflation has slowed from its peak over two years ago but remains above the Federal Reserve’s 2% target. While not the Fed’s primary inflation indicators, they contribute to the personal consumption expenditures price index favored by policymakers. Economists predict the PCE deflator to show a month-over-month increase of around 0.2% when released in late October.
Oren Klachkin, a markets economist at Nationwide Financial, stated, “The latest PPI and CPI data don’t disrupt the disinflation narrative and yet remind us we aren’t on a smooth glide slope to 2%.”
Additionally, the University of Michigan Survey of Consumers reported a decline in sentiment for October as near-term inflation expectations rose. The sentiment index dropped by 1.7% from September, while one-year inflation expectations increased to 2.9%, matching the highest level since June.
Within the PPI, a 0.2% decrease in final demand goods prices was offset by a 0.2% rise in services. Excluding trade services from the core PPI, the index increased by 0.1%. Deposit services costs surged by 3%, driving the services index up, while prices for professional and commercial equipment wholesaling fell by 6.3%.
On the goods side, a 2.7% decline in final demand for energy was the primary factor in the decrease. Gasoline prices fell by 5.6%, restraining gains on the goods index, while diesel fuel prices plummeted by 17.6%.
Despite some categories like shelter, food, and vehicle costs remaining elevated, Federal Reserve officials are confident that inflation is moving back toward the target. Minutes from the September central bank meeting revealed a split among policymakers regarding the decision to cut the Fed’s benchmark interest rate by 0.5%.
Most officials anticipate further cuts based on data trends. Markets expect the Fed to reduce rates by 0.25% at each of its remaining two meetings this year.
