The producer price index climbed 0.4% in August, matching expectations and signalling continued pipeline cost pressures across the U.S. economy.
The Bureau of Labor Statistics reported the seasonally adjusted increase in final demand costs for goods and services, in line with the Dow Jones consensus forecast.
On an annual basis, headline PPI reached 5.4%, sitting well above the Federal Reserve’s 2% inflation target and coming in 0.1 percentage points higher than analysts had estimated.
The PPI had risen just 0.1% in July, a slight upward revision from the original estimate of no change, adding further context to August’s acceleration.
Excluding food and energy, core PPI rose 0.2%, softer than the forecast of 0.3%, while core less trade services increased 0.3%, in line with estimates.
Energy prices were a dominant driver, with final demand energy prices surging 4.2%, pushed largely by diesel costs, which soared 24.1% for the month.
Goods prices broadly rose 1.1%, while services prices increased by just 0.1%, with transportation and warehousing accounting for a 2.3% gain within that category.
Portfolio management costs, a closely watched metric within PPI calculations, fell 1.6% for the month but remained 18.8% higher compared with a year ago.
Pipeline pressures also remained visible, with processed goods prices rising 1.8% and unprocessed goods accelerating by 1.1% during the same period.
“Net, net, today’s PPI inflation report does nothing to turn down the warnings about the inflation threats the economy faces, especially if you are an inflation hawk with an itchy trigger finger at the Federal Reserve,” wrote Chris Rupkey, chief economist at Fwdbonds.
Stock market futures turned negative following the report’s release, which coincided with U.S. crude oil prices topping $100 a barrel, while Treasury yields moved sharply higher.
The 10-year Treasury note hit its highest level since November 2023, reflecting growing investor concern about the persistence of elevated inflation across the economy.
Traders slightly increased their bets on a rate hike following the PPI data, pushing the probability close to 66%, according to the CME Group’s FedWatch gauge of futures prices.
The Fed has been on hold throughout 2026 but is widely expected to approve a quarter percentage point increase to its benchmark interest rate at next week’s policy meeting.
Chairman Kevin Warsh recently emphasised his commitment to returning inflation to target and indicated that further action may be necessary, while other officials have urged a more patient, data-driven approach.
Much of this year’s persistent inflation has been attributed to the lingering impact of tariffs as well as the ongoing conflict in the Middle East, both of which continue to distort price pressures.
The consumer price index report, due Friday, is expected to show a headline annual inflation rate of 3.4%, with core CPI forecast at 2.4%, providing the next major data point before the Fed’s decision.