Wholesale inflation fell in August, but prices are still near multi-decade highs

Wholesale inflation eased in August for the second month in a row, although prices for daily necessities remain at multi-decade highs, putting pressure on businesses and millions of American families.

The Labor Department said on Wednesday its producer price index measures Inflation at the wholesale level Before it reached consumers, it was down 0.1% in August from the previous month. On a yearly basis, prices are up 8.7% – notably down from the 9.8% increase recorded in July and the lowest level since August 2021.

Economists polled by Refinitiv expected an 8.8% annual gain and a 0.1% monthly decline.

Excluding food, energy and trade services, the inflation rate at the wholesale level increased by 0.2% for the month. This is less than expectations of a 0.3% gain. Over the past 12 months, core prices have increased by 5.7%.

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“There is a disparity in the construction of core and core inflation, with the headline being cold and core high,” said Jamie Cox, managing partner at Harris Financial Group. “This is a strange phenomenon and is likely to be affected by the shift from goods to services after the pandemic.”

Overall, commodity prices fell 1.2% last month, which is the biggest contributor to the drop in the headline inflation number. This decrease can largely be traced back to a decrease of 6%. Energy prices final demand, including a staggering 12.7% drop in gasoline prices, according to the Labor Department. Food prices were flat in August and were not up from the previous month.

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Meanwhile, the Services Index advanced 0.4% in August, the fourth consecutive rise. The majority of this increase was caused by a 0.8% jump in commercial services.

A worker prepares to spin onions on a pallet at a wholesale produce market in the Union Market district in Washington, D.C., U.S., on Tuesday, August 30, 2022. (Photo: Al Drago / Bloomberg via Getty Images / Getty Images)

These numbers come just a day after the Labor Department announced that the Consumer Price Index for August came in higher than expected.

Both versions of the data are important measures of inflation, as the Producer Price Index is believed to be a good leading indicator of inflationary pressures as costs work their way into consumers.

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Stocks fell sharply on Tuesday after a surprisingly hot report on fears of more aggressiveness Federal Reservewith the Dow Jones Industrial Average down 1,276 points – the worst day since June 2020. Meanwhile, the S&P 500 Index is down 4.32% while the Nasdaq Composite is down 5.16%.

Markets opened slightly higher on Wednesday.

Investors are now betting that central bank policy makers will agree to a third consecutive rate hike by 75 basis points when they meet again on September 20-21 – or even greater with a historic 100 basis point increase.