U.S. Producer Prices Slip 0.1% in August, Fed Cut Looms.
U.S. producer prices post an unexpected 0.1% decline in August.
U.S. factory-gate prices unexpectedly slipped in August, signaling softer-than-expected inflationary pressures and strengthening the case for the Federal Reserve to cut interest rates at its upcoming meeting.
Data from the Bureau of Labor Statistics showed the producer price index (PPI) for final demand fell 0.1% last month, against economists’ forecasts of a 0.3% rise, following July’s downwardly revised 0.7% gain. The drop was largely driven by a 0.2% decline in final demand services, the sharpest since April, which offset a modest 0.1% rise in goods prices.
Sectors vulnerable to U.S. tariffs, including apparel, textiles, furniture, and motor vehicles, also saw subdued price growth. Analysts note that this disinflationary trend could influence the Fed’s preferred inflation gauge—the personal consumption expenditures (PCE) index—due later this month, though after the Fed’s policy decision.
The PPI release precedes Thursday’s consumer price index (CPI) data, another key measure of inflation. Softer readings may ease concerns that higher tariffs could endanger both sides of the Fed’s mandate: employment and price stability.
Markets now see a Fed rate cut next week as nearly certain, with most expecting a 25-basis-point reduction and a smaller chance of a 50-point move. Following the report, S&P and Nasdaq futures rose, while U.S. Treasury yields dropped.
