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US producer prices rose in August as energy costs shot up

WASHINGTON — Higher energy costs led to prices at the wholesale level rising in August at the fastest pace in four months.
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WASHINGTON — Higher energy costs led to prices at the wholesale level rising in August at the fastest pace in four months.

The Labor Department said Wednesday that its producer price index, which measures inflation pressures before they reach the consumer, rose 0.2 per cent last month. It was the largest monthly increase since a 0.5 per cent gain in April. Inflationary pressures have largely been subdued in recent months. Much of the increase in August came from a 3.3 per cent surge in energy costs. Food expenses slipped in August, including a sharp 20.6 per cent decline in wheat prices.

Core inflation, which excludes volatile food and energy costs, also rose 0.1 per cent last month. Over the past 12 months, wholesale prices are up a moderate 2.4 per cent while core prices have risen 2.0 per cent.

Despite the monthly increase, relatively low inflation has been a constant throughout the recovery from the Great Recession will continue. For the past five years, inflation has stayed below the Federal Reserve's target of annual price gains of 2 per cent. The Fed's preferred measure of core inflation for consumers has risen just 1.4 per cent over the past 12 months.

For producers, food expenses slipped in August. This included a sharp 20.6 per cent decline in wheat prices, the biggest decline since April 2008. Producer costs for plastics, investment advice and airline passengers also fell in August.

Prices for iron and steel scrap rose in August as did the costs for industrial chemicals.

The Fed is closely monitoring inflation to determine whether to raise a key short-term interest rate.

The U.S. central bank raised the rate in March and June from relatively low levels. Many investors and analysts believe it could hike the rate against at a December meeting, but that depends in large part on whether inflation appears to be headed toward staying consistently at 2 per cent.

Josh Boak, The Associated Press



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