Wholesale Inflation Is Rising Again

Wholesale inflation picked up last month after cooling earlier this summer as higher oil and gas prices stemming from the Iran war keep costs elevated. The Labor Department's Producer Price Index—which captures inflation before it reaches consumers—rose 5.4% in August from a year ago, up from 4.8% in July, the government said Thursday. Annual wholesale inflation peaked this year at 5.9% in May after the Iran conflict raised energy costs. On a monthly basis, wholesale prices increased 0.4% from July to August, after a 0.1% increase the previous month, the AP reports.

Inflation has shown some signs of easing in recent months but is still high, frustrating consumers who are struggling with more expensive gas, groceries, clothing, and other essentials. Excluding the volatile food and energy categories, core prices rose 0.2% from July to August, the same as the previous month. Compared with a year ago, core prices rose 4.6%, up from 4.2% in July. Energy prices were a big driver of last month's increase as fighting in the Middle East flared. The wholesale price of diesel soared 24.1% just from July to August. It has risen nearly 78% from a year earlier. Diesel fuel is used in large cargo trucks for shipping goods all over the country, and could make groceries, clothes, and other items more expensive. Shipping prices rose 2.3% just last month.

• Other items that jumped in price include airfares, hospital care, and electronic components, which have been lifted by rampant spending on AI data centers. Food prices ticked up just 0.1% last month, a potential signal that grocery costs could cool. Electric utility prices declined, too.
• Thursday's figures will come under particularly close scrutiny because they could help determine whether the Federal Reserve raises its short-term interest rate at a policy meeting next week. Data from the Producer Price Index helps calculate the Fed's preferred inflation measure, which will be released Sept. 30.
• Even more important is Friday's Consumer Price Index report, the government's highest-profile inflation release. Figures from that report are also used to compile the Fed's preferred measure of costs.
• "The PPI release itself was inconclusive, in that doesn't really help to settle the question of 'hike or no hike' from the Fed next week, but WTI oil prices surging back above $100 and Treasury yields hitting new highs is certainly raising the stakes for investors ahead of tomorrow's crucial CPI report," said Stephen Coltman at 21shares, per CNBC.