A measure of wholesale prices showed no change in September, indicating a continued slowdown in inflation, the Labor Department reported Friday.
The producer price index, which measures what producers get for their goods and services, remained steady for the month and up 1.8% from a year ago. Economists polled by Dow Jones expected a monthly gain of 0.1% after August’s 0.2% rise.
Excluding food and energy, the PPI increased by 0.2%, meeting expectations, and by 2.8% compared to last year.
The report comes a day after the Labor Department announced that the Consumer Price Index, a more widely followed measure of inflation that shows what consumers actually pay for goods and services, increased by 0, 2% for the month and 2.4% compared to last year.
Markets showed little immediate reaction to the data, with futures pointing slightly higher on Wall Road while Treasury yields rose on longer-duration securities. Stocks rose later in the session, with the Dow Jones Industrial Average adding more than 300 points on the heels of strong bank earnings reports.
Together, the releases indicate that inflation is off the breakneck pace that peaked more than two years ago, but remains well above the Federal Reserve’s 2% target. Although neither is the Fed’s main inflation indicator, they both feed into the personal consumption expenditures price index that policymakers prefer. Following these releases, several economists said they expected the PCE deflator to show an increase of around 0.2%, or slightly more for the month, when it is released near the end of October.
“The latest PPI and CPI data do not disrupt the disinflation narrative and yet remind us that we are not on a gentle slope towards 2%,” said Oren Klachkin, markets economist at Nationwide Monetary.
Separately on Friday, the University of Michigan Consumer Survey showed that sentiment collapsed in October as near-term inflation expectations rose. The survey’s international confidence index fell 1.7% from September, while year-on-year inflation expectations rose to 2.9%, tied for the highest level since June.
Within the PPI, a 0.2% decline in final demand goods prices offset a 0.2% increase in goods. Excluding commercial companies from the core PPI, the index increased by 0.1%.
A 3% rise in filing company costs lifted the company index, while wholesale prices for professional and commercial equipment fell 6.3%.
On the goods side, a 2.7% drop in final energy demand was the main factor in this decline. Likewise, the gasoline index fell 5.6%, dampening the performance of the goods index. Diesel fuel prices plunged 17.6%.
In recent days, Fed officials have expressed confidence that inflation is returning to target, even as some items, such as housing, food and vehicle costs, have remained stubbornly high. Minutes from the central bank’s September meeting indicated that policymakers were divided on the decision to cut the Fed’s benchmark interest rate by half a percentage point.
Most officials say they expect to continue reductions for as long as the data indicates. Markets expect the Fed to cut rates by a quarter of a percentage at each of its two remaining meetings this year.
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