Producer price index August 2022:

Relentless Inflation Means the Fed Could Raise Interest Rates, Even Faster
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A woman buys chicken at a supermarket in Santa Monica, California on September 13, 2022.

Apu Gomes | AFP | Getty Images

The prices producers receive for goods and services fell in August, a slight respite from inflationary pressures that threaten to send the US economy into recession.

The producer price index, an indicator of prices received at the wholesale level, fell 0.1%, according to a report from the Bureau of Labor Statistics on Wednesday. Excluding food, energy and commercial services, the core PPI increased by 0.2%.

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Relentless Inflation Means the Fed Could Raise Interest Rates, Even Faster

Economists polled by Dow Jones expected the overall PPI to fall 0.1% and the core to rise 0.3%.

On an annual basis, the overall PPI rose 8.7%, a substantial pullback from the 9.8% increase in July and the smallest annual increase since August 2021. The core PPI rose 5.6% compared to a year ago, corresponding to the lowest rate since June. 2021.

As was the case over the summer, the drop in prices was largely due to a drop in energy.

The final energy demand index fell 6% in August, leading to a 12.7% decline in the gasoline index. That has helped feed through to consumer prices, which have fallen sharply after briefly topping $5 a gallon at the pump earlier this summer.

The numbers come a day after the BLS released consumer price index data for August that was higher than expected. The two reports differ in that the PPI shows what producers receive for finished goods, while the CPI reflects what consumers pay in the market.

Following Tuesday’s report, stocks fell and expectations rose for action from the Federal Reserve at its meeting next week. Stock market futures were positive after the PPI report, while Treasury yields were also higher.

Markets were debating an interest rate hike of half a point to three-quarters of a point. After the release, the market fully priced a three-quarter point move, and there’s now a 1 in 3 chance of a full 1 percentage point upside, according to tracked fed funds futures data. by the CME Group.

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