By Obinna Uballa
United States inflation cooled at the wholesale level last month as producer prices unexpectedly dipped, easing pressure on businesses and reinforcing expectations of a Federal Reserve rate cut later this month.
Data from the Bureau of Labor Statistics released Wednesday showed producer prices fell 0.1% in August, pulling annual inflation down to 2.6% from a revised 3.1% in July. Economists had expected a monthly increase of 0.4%.
The decline was driven largely by a 1.7% drop in trade services, which reflects the profit margins of wholesalers and retailers. Analysts noted this could mean businesses are absorbing higher costs rather than passing them on to consumers. August’s decline in trade services was the steepest in over a year.
Excluding volatile components such as trade services, food and energy, prices climbed 0.3% on the month and 2.8% year-on-year — showing underlying inflationary pressures remain.
“The tariff effect is not boosting across-the-board price pressures yet,” said Christopher Rupkey, chief economist at FwdBonds to CNN. “Core producer goods prices are rising significantly, so the country is not out of the woods from the inflation threat. But investors are shrugging it off, betting on rate cuts.”
Markets responded positively to the report. Stock futures turned higher, with S&P 500 futures up 0.54% and Nasdaq 100 gaining 0.57%. Treasury yields slipped, with the two-year note falling after the release.
The Producer Price Index (PPI), which tracks prices received by producers for goods and services, is often seen as an early signal of consumer inflation trends. Analysts say August’s cooling suggests price pressures are stabilizing, though economists caution that demand weakness may also be a factor keeping inflation in check.
