 "US inflation shows signs of slowing as wholesale prices stabilise")
The US Labour Department reported on Friday that wholesale prices remained stagnant in September, indicating a potential return to normal inflation levels following years of pressure on American households since COVID-19.
According to the Labour Department’s producer price index (PPI), which measures inflation before it reaches consumers, there was no change from August to September, after a 0.2% increase the previous month.
On a year-over-year basis, the PPI rose 1.8% in September, down from 1.9% in August. Excluding volatile food and energy prices, core wholesale prices increased 0.2% from August and 2.8% from the previous year, slightly higher than the preceding month.
The wholesale price of services saw moderate growth, but a decline in goods prices offset this.
The wholesale inflation data arrives one day after the government said consumer prices rose just 2.4% in September from 12 months earlier — the smallest year-over-year rise since February 2021.
That was barely above the Federal Reserve’s 2% target and far below inflation’s four-decade high of 9.1% in mid-2022. Still, with the presidential election less than a month away, many Americans remain unhappy with consumer prices, which remain well above where they were before the inflationary surge began in the spring of 2021.
The steady easing of inflation might be diminishing former President Donald Trump’s political advantage on the economy. In some surveys, Vice President Kamala Harris has pulled even with Trump on the issue of who would best handle the economy. Yet most voters still give the economy relatively poor marks, mostly because of the cumulative price increases of the past three years.
Impact Shorts
More ShortsThe producer price index released Friday can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably healthcare and financial services, flow into the Fed’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.
Inflation began surging in 2021 as the economy accelerated with surprising speed out of the pandemic recession, causing severe shortages of goods and labor. The Fed raised its benchmark interest rate 11 times in 2022 and 2023 to a 23-year high. The resulting much higher borrowing costs were expected to tip the United States into recession, but they didn’t. The economy kept growing, and employers kept hiring. And inflation has kept slowing.
Last month, the Fed all but declared victory over inflation and slashed its benchmark interest rate by an unusually steep half-percentage point, its first rate cut since March 2020, when the pandemic was hammering the economy. Two more rate cuts are expected this year and four in 2025.
With inputs from agencies.
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