US producer price gains slow in September, some economists spy peak

US wholesale price inflation slowed last month as goods prices dipped, but were steady at the 'core' level, although some economists believed that the latter might be peaking.

So-called total final demand prices rose by 0.2% month-on-month in September, according to the Department of Labor, but the year-on-year rate of change slowed from 2.8% in August to 2.6% for September.

Economists were anticipating a rise in headline producer prices of 0.2% versus the prior month and of 2.7% against the same month one year ago.

Good prices dipped by 0.1% on the month, Labor said, with food costs down by 0.6% and those for energy declining by 0.8%.

Excluding food, energy and trade on the other hand, 'core' goods prices jumped by 0.4% after rising 0.1% during the previous month.

Services prices meanwhile rebounded by 0.3% on the month after slipping by a tenth of a percentage point in August, on the back of a 1.8% surge in transportation and warehousing costs, led by a 5.5% increase in airline fares on the back of dearer fuel.

Commenting on Wednesday's data, Ian Shepherdson at Pantheon Macroeconomics: "Goods ex-food and energy rose 0.2%, after no change in August. Before August, the trend was running at close to 0.3% per month, so it appears to be slowing as the impact of the $25 rise in oil prices in the year through June starts to fade. The recent rise in oil prices is not big enough, yet, to push the trend back up.

"The short-term correlation between PPI and CPI airline fares is low, but this jump does raise the risk of an outsized jump in the CPI, due tomorrow."

On an apparently similar note, Paul Ashworth at Capital Economics said: "The annual rate of underlying personal consumption producer price was unchanged at 2.9%, which suggests that core PCE inflation will edge above the Fed’s 2% target soon.

"That will keep the Fed hiking interest rates at its current once-a-quarter pace until around the middle of next year, by which time we expect that slowing economic growth will prompt the Fed to move to the side lines."

As of 1427 BST, the yield on the benchmark 10-year US Treasury note was up by three basis points at 3.23%.