U.S. wholesale inflation fell in August as businesses saw smaller profits – National AURORATOTO GROUP

U.S. producer prices fell unexpectedly last month, dropping 0.1 per cent from July.

The Labor Department reported Wednesday that its producer price index — which captures inflation in the supply chain before it hits consumers — showed that wholesale inflation decelerated in August after advancing 0.7 per cent in July.

Wholesale services prices fell 0.2 per cent from July on smaller profit margins at retailers and wholesalers, which might be a sign that those companies are absorbing the cost of President Donald Trump’s sweeping taxes on imports.

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Compared to a year earlier, producer prices rose 2.6 per cent.

Excluding volatile food and energy prices, so-called core producer prices also fell 0.1 per cent from July and were up 2.8 per cent from a year earlier.

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The numbers were lower than economists had forecast.

The wholesale price report came out day before the Labor Department releases its consumer price index. The CPI is expected to show that consumer price inflation picked up slightly last month, rising 0.3 per cent from July, an uptick from a 0.2 per cent increase the month before.

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Compared with a year earlier, consumer prices are expected to have risen 2.9 per cent in August, up from a 2.7 per cent year-over-year increase in July.

Wholesale prices can offer an early look at where consumer inflation might be headed.

Economists also watch it because some of its components, notably measures of health care and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, price index.