The Bureau of Labor Statistics said that producer prices for final demand goods and services were down 0.1 percent in September. It was the third straight month with inflationary pressures easing, a positive development that helps both businesses and consumers. On a year-over-year basis, final demand producer prices have risen 1.6 percent over the past 12 months, decelerating from 2.1 percent in May. Producer prices for final demand goods were off 0.2 percent, extending the 0.3 percent decline observed in August, with both food and energy costs lower.
Energy prices have fallen in four of the past five months, declining by 0.7 percent in September. One of the key drivers of this decrease was the fall in gasoline prices, down 2.6 percent for the month. Indeed, the price of West Texas intermediate crude was $97.86 per barrel on August 29, but by September 30, that figure had fallen to $91.17 a barrel. (It has declined further since then, closing at $81.84 per barrel yesterday. This could indicate further deceleration in energy and producer prices in October.)
Meanwhile, food prices also decreased 0.7 percent in September. After rising 5.4 percent from December to April, producer prices for final demand food products have eased by 1.5 percent. As such, the cost of food remained 3.8 percent higher in September than at the start of the year. This has largely stemmed from higher prices for meats, eggs, dairy and produce. The largest price declines in August were seen in beef and veal, chicken, cooking oils, eggs, grains, milled rice, pork, oilseeds and turkey products.
Beyond food and energy, core prices for final demand goods were up 0.2 percent. There were higher monthly costs for commercial products, floor coverings, industrial chemicals, pumps and compressors and women’s apparel. At the same time, producer prices for footwear, household appliances and furniture, jewelry, lawn and garden equipment, passenger cars, toys and games and truck trailers were lower.
Core inflation for final demand goods and services was 1.6 percent in September, down from 1.8 percent in August and 2.1 percent in May. As such, the reduction in inflation seen in the past few months should take some pressure off of the Federal Reserve Board as it prepares to normalize its monetary policies.
Chad Moutray is the chief economist, National Association of Manufacturers.