Are you keeping up with the latest economic news? Wholesale prices rose in August, in line with expectations, as the Federal Reserve prepares to lower interest rates. The producer price index, which measures the cost of goods and services received by producers, increased 0.2% for the month. This matched the consensus estimate and indicates a steady increase in demand.
When excluding food and energy, PPI increased by 0.3%, slightly surpassing expectations. This core increase remained the same even when excluding trade services. On an annual basis, the headline PPI rose by 1.7%, while the annual rate for PPI excluding food, energy, and trade was at 3.3%.
The Labor Department also reported that initial jobless claims totaled 230,000 for the week ending on September 7, slightly higher than the previous period. Despite this, stock market futures remained relatively unchanged and Treasury yields mostly decreased after the report.
What’s driving the increase in prices? Services prices made a significant contribution, with a 0.4% monthly increase driven by services excluding trade, transportation, and warehousing. Additionally, there was a notable 4.8% jump in guestroom rental prices. On the other hand, goods prices remained flat for the month, reversing the gain seen in July.
With both PPI and CPI reports aligning with expectations, the Federal Reserve is expected to initiate a rate-cutting cycle. Market experts anticipate an initial 0.25% cut at the upcoming policy meeting, followed by further reductions over time. Recent data and statements from policymakers point towards a more gradual approach to rate cuts, with the potential for a full percentage point reduction by the end of 2024.
Fed officials are turning their attention to a slowing labor market, as indicated by the slight increase in weekly jobless claims and continuing claims. While layoffs have not spiked, the data suggests a softening labor market trend.
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