Finance · updated 1h ago · 2 min read
U.S. Producer Inflation Accelerates in August as Diesel Costs Surge 24.1%
Producer price index rose 5.4% year over year in August, driven by diesel costs. Diesel prices topped $6 per gallon for the first time, straining transport and inflation.
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PPI accelerates on diesel
Wholesale inflation in the United States picked up in August as energy costs kept rising, with the Producer Price Index increasing 5.4% in the 12 months that ended in August, up from 4.8% in July.
“increased 5.4% in the 12 months that ended in August”
On a monthly basis, prices across goods and services rose 0.4% in August from 0.1% in July, and more than three-fourths of the run-up in goods prices stemmed from a 4.2% monthly rise in energy prices.
Energy costs were led by diesel fuel, which surged 24.1% in the month, and the report said crude oil futures have surged so far in September.
Brent crude raced above $105 a barrel on Thursday for the first time since late May, and the PPI report could complicate the Federal Reserve’s efforts to bring inflation down to its 2% target.
Fed, rates, and core
Investors’ expectations for a rate hike next week rose to 70% from 64% after the PPI report was released, according to the CME FedWatch.
The report also showed that two volatile categories that make up a measure known as “core” inflation rose at a more muted annualized rate of 4.6% versus 4.3% in July, while on a monthly basis core inflation slowed to 0.2% in August from 0.3% the prior month.
Thursday’s report came one day ahead of the August Consumer Price Index data, which economists expected to show the annual rate of price changes slowed to 3.3% last month from 3.4% in July.
In a note Thursday morning, Stephen Brown, chief North America economist at Capital Economics, said the electronic component costs “leapt by 3.4% last month and are up 27.6% for the year,” linking the pressure to the AI buildout.
Diesel hits $6, ripple risk
Diesel prices in the United States surpassed $6 a gallon for the first time ever, with the national average rising to a record $6.05 on Thursday, up more than 60% from $3.71 a year ago, according to AAA.
“The national average for a gallon of diesel rose to a record $6.05 on Thursday”
The Department of Labor noted on Thursday that more than a third of the jump in goods prices for producers in August was attributable to rising diesel costs, which rose 24.1% last month.
Thomas Ryan, a senior North American economist at Capital Economics, told CBS News that higher diesel prices are "something that households are going to have to weather at least over the remainder of this year," as businesses pass on energy costs.
Patrick De Haan, a petroleum expert at GasBuddy, said diesel prices are soaring due to the ongoing war with Iran and also pointed to a global squeeze on refining capacity in both the Middle East and Russia.