U.S. producer prices rise below expectations in August, pipeline price pressure to remain moderate

U.S. producer prices rose sequentially in August. PPI rose 0.2 percent month-on-month, slightly below consensus expectations of 0.3 percent. Excluding energy, food and trade, producer price inflation also rose 0.2 percent as a solid rise in energy prices was countered by softness in food and trade margins.

Prices of goods and services both rose sequentially by 0.5 percent and 0.1 percent, respectively.

In the goods category, food prices dropped whereas energy prices grew strongly after having fallen for three straight months. On a year-on-year basis, producer prices were up 2.4 percent as compared with July’s year-on-year print of 1.9 percent. Excluding energy, food and trade, PPI rose 1.9 percent year-on-year in August.

Meanwhile, personal consumption rose 0.2 percent sequentially and 2.3 percent year-on-year. Stripping food and energy, PPI personal consumption came in flat, the third consecutive month where the index stays unchanged.

The PPI report released today reveals the modest producer price pressures throughout the board in the month. But positive energy base effects were supportive of the year-on-year rate in producer prices leading to rebound in the headline measures for final demand PPI and PPI personal consumption, noted Barclays in a research report.

Pipeline price pressures are likely to stay moderate, reflecting the fact that the headwind from imported inflation and global commodity prices has waned in recent months. Moreover, the recent hurricanes in the south might result in a near-term boost to pipeline price pressures in the next couple of months, while supply chains take time to recover, stated Barclays.

The consumer price inflation data is set to be released on Thursday. According to Barclays, the headline inflation is likely to have risen by a soft 0.4 percent sequential print and 1.9 percent year-on-year, whereas the core inflation figure is expected to have risen firmly by 0.1 percent sequentially and 1.6 percent year-on-year.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 116.007. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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