Producer Prices Ticked Higher in September, but with Inflation Largely Still in Check for Now

Producer prices ticked higher in September, bouncing back from softness in the prior two months. The Bureau of Labor Statistics said that producer prices for final demand goods and services rose 0.3 percent in September, the first increase reading in three months. For final demand goods, food and energy prices were both higher, up 0.5 percent and 2.5 percent, respectively, but each were coming back from notable declines in both July and August. The longer-term trend has been negative for both. Food costs have decreased 3.4 percent over the past 12 months, with energy prices off by 2.4 percent year-over-year.

Overall, producer prices for final demand goods and services have increased 0.7 percent since September 2015, its highest year-over-year rate in 21 months. Excluding food and energy costs, core inflation was also up by 0.3 percent in this report. Core producer prices grew 1.2 percent year-over-year in September, up from 1.0 percent in August and like the headline number at its fastest pace in three months.

Yet, despite the uptick in producer prices in September, inflationary pressures continue to remain mostly in check. Core inflation on a year-over-year basis has remained below the Federal Reserve’s stated goal of 2 percent for 28 straight months (since May 2014). Prices are likely to accelerate somewhat moving forward, likely exceeding the two percent threshold in the coming months, but the Federal Open Market Committee continues to worry more about sluggish economic growth than prices, at least for now.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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