The Bureau of Labor Statistics said that producer prices for final demand goods and services were unchanged in August. At the same time, producer prices for final demand goods were down 0.6 percent, extending the 0.1 percent decline observed in July. Goods prices were pulled lower by reduced energy costs, which fell 3.3 percent for the month. Indeed, the price of West Texas intermediate crude oil reached an 11-year low of $38.22 per barrel on August 24. Final demand energy costs were 19.6 percent lower in August than 12 months ago.
Meanwhile, food costs were up 0.3 percent for the month, rebounding from a decrease of 0.1 percent in the prior report. Producer prices for food were higher largely on increases seen for beef, coffee, eggs, fruits and vegetables, pork and turkeys. Egg prices continue to soar on avian flu concerns. In contrast, costs for chickens, cooking oils, fish and seafood, grains and pasta products were lower. Over the longer term, food prices have drifted lower, providing some relief from higher costs seen at the beginning of 2014. For instance, food prices have fallen 2.6 percent year-over-year.
Over the past 12 months, producer prices for final demand goods and services have declined 0.7 percent. We have seen negative year-over-year numbers each month so far this year. This was mainly due to reduced energy costs. Along those lines, core inflation – which excludes food and energy costs – was 0.9 percent in August, up from 0.6 percent in July. Overall, though, these data points show that pricing pressures remain quite minimal right now. Core inflation has remained below the Federal Reserve’s stated goal of 2 percent for 15 consecutive months, with this measure being below 1 percent in five of the past six months.
Chad Moutray is the chief economist, National Association of Manufacturers.