Wholesale Inflation Rose 0.4% in August as Diesel Costs Surge

More than a third of the August increase in wholesale inflation can be traced to a surge in diesel fuel prices. (Ronaldo Schemidt / AFP via Getty Images)

Key Points

• The U.S. producer price index for final demand rose 0.4% in August, translating to a 5.4% increase year over year.
• More than a third of the August wholesale inflation increase was driven by a 24.1% month-over-month jump in diesel prices.
• Core PPI, which excludes food and energy, rose 0.2% month over month in August and 4.6% from a year earlier.

U.S. wholesale inflation was right in line with economists’ expectations last month, with a firmer monthly reading that was led by higher diesel fuel prices.

The producer price index for total final demand rose 0.4% in August, translating to growth of 5.4% year over year, the Bureau of Labor Statistics reported Thursday.

That’s exactly what economists surveyed by FactSet expected to see from producer prices in August after wholesale inflation rose a revised 0.1% in July. Producer prices were up 4.8% year over year in July.

The index for final demand goods helped push wholesale inflation higher last month, advancing 1.1% month over month after declining in revised June and July estimates. The biggest driver within goods was diesel prices, which jumped 24.1% month over month in August. In fact, the BLS reported that more than a third of the August increase can be traced to the surge in diesel prices.

Gasoline, jet fuel, and home heating oil, also advanced on the month, with the overall energy costs up 4.2% month over month.

Services costs increased 0.1% month over month in August, a slight deceleration from July’s 0.2% monthly reading. Much of the rise stemmed from a 2.3% increase in prices for transportation and warehousing services.

Core PPI, which excludes food and energy, climbed 0.2% month over month in August, a bit softer than the consensus call for a 0.3% advance and a deceleration from July’s revised 0.3% reading. Core producer prices rose 4.6% year over year, an acceleration from July’s revised 4.3% pace.

The BLS also reports a core PPI metric that excludes trade, which rose 0.3% in August and was up 4.7% from a year earlier.

The continued persistence of wholesale inflation could make a stronger case for the Federal Reserve to raise interest rates at the upcoming policy meeting later this month, though much of the August increase was due to higher fuel costs.

The biggest factor in determining the September rate decision, however, appears to be the outcome of the consumer price index, which the BLS will release on Friday at 8:30 a.m. Eastern.

This is breaking news. Check back for more analysis soon.

Write to Megan Leonhardt at megan.leonhardt@barrons.com

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