Tags: Producer | Prices | Economy | Federal Reserve

Producer Prices Unchanged on Lower Food, Gasoline Costs

Tuesday, 16 Sep 2014 08:49 AM

A measure of prices that producers receive for their goods and services was unchanged in August, the latest sign that inflation is in check.

Wholesale gas prices fell 1.4 percent last month and food costs dropped 0.5 percent, the Labor Department said Tuesday. Those declines offset higher prices for transportation and shipping services.

The producer price index rose just 1.8 percent last month from a year earlier. The index measures price changes before they reach the consumer.

Economists had expected that the producer price index had risen 0.1 percent in August from the previous month, according to a survey by FactSet.

Higher food and gas costs had pushed up producer prices earlier this year, briefly raising concerns that inflation might accelerate. But gas and food prices have since moderated, slowing wholesale inflation.

The drop in wholesale gas prices has led to lower costs for consumers at the pump, leaving them more money to spend on other goods. The average price for a gallon of gas fell to $3.39 Monday, eight cents cheaper than a month ago.

Food prices, meanwhile, fell in May and June before rising just 0.4 percent in July. That's much lower than the big gains recorded earlier this year, when food prices soared 2.3 percent in April and 1.3 percent in March. They were driven higher by a drought in California and brutal winter storms and freezing temperatures in the Midwest.

The Fed targets inflation at about 2 percent as a guard against deflation, which could drag down wages and spark another recession. At the same time, the Fed wants to avert excessive inflation and protect consumers and the purchasing power of the dollar.

Americans' paychecks, meanwhile, are barely increasing, which has limited consumers' willingness and ability to spend. That has made it harder for businesses to raise prices.

Low inflation has enabled the Fed to pursue extraordinary measures to boost the economy. It has begun to unwind some of those measures, cutting a monthly bond-buying program to $25 billion, from $85 billion last year.

Those bond purchases had ensured low interest rates that encouraged investors to pour money into the economy.

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Economy
U.S. producer prices were flat in August, pointing to muted inflation pressures that should see the Federal Reserve in no hurry to raise interest rates.The Labor Department said on Tuesday its producer price index for final demand was unchanged as gasoline and food costs...
Producer, Prices, Economy, Federal Reserve
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2014-49-16
Tuesday, 16 Sep 2014 08:49 AM
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