Wholesale inflation declines in August, but prices remain near multi-decade high

• September 14, 2022
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• Announcements, Business & Markets, Interest Rates, Politics & Economy, Real Estate Finance, Recession, World News, Your Real Estate Life

Inflation at the wholesale level cooled in August for the second consecutive month, although prices for everyday necessities remain at a multi-decade high, squeezing businesses and millions of American households.

The Labor Department said Wednesday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, declined 0.1% in August from the previous month. On an annual basis, prices soared 8.7% – a marked decline from the 9.8% increase recorded in July and the lowest level since August 2021.

Economists surveyed by Refinitiv expected to see an annual gain of 8.8% and a monthly drop of 0.1%.

Excluding food, energy and trade services, inflation at the wholesale level increased 0.2% for the month. That is below the expectation for a gain of 0.3%. Over the past 12 months, core prices climbed 5.7%.

“There is a divergence in headline and core inflation building, where headline is cooling and core is heating up,” said Jamie Cox, managing partner of the Harris Financial Group. “That’s an odd phenomenon and likely influenced by the shift from goods to services post pandemic.”

Overall, prices for goods fell 1.2% last month, the biggest contributor to the drop in the headline inflation figure. That decrease can largely be traced to a 6% plunge in prices for final demand energy, including a stunning 12.7% decline in gasoline prices, according to the Labor Department. Food prices were flat in August and did not increase from the previous month.

Meanwhile, the services index advanced 0.4% in August, the fourth consecutive rise. A majority of that increase stemmed from a 0.8% jump in trade services.

A worker prepares to wheel onions on a pallet at a wholesale produce market in the Union Market district in Washington, D.C., US, on Tuesday, Aug. 30, 2022. (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)

These numbers come just one day after the Labor Department reported the consumer price index for August came in hotter than expected.

Both data releases are considered to be important measurements of inflation, with the PPI believed to be a good leading indicator of inflationary pressures as costs work their way down to consumers.