In the U.S., wholesale prices remained stable last month, indicating a potential return to normalcy in inflation rates after years of economic strain stemming from the COVID-19 pandemic.
The Labor Department revealed on Friday that the producer price index (PPI), which monitors inflation before it affects consumers, showed no change from August to September.
This follows a modest increase of 0.2% in the previous month.
Year-over-year, the PPI experienced an increase of 1.8% in September, the lowest since February, a decrease from August’s 1.9% increase.
When excluding volatile sectors such as food and energy, core wholesale prices rose by 0.2% from August and 2.8% from the previous year, slightly higher than the 2.6% increase noted the month before.
While wholesale service prices saw a minor uptick, this was counteracted by a decrease in the prices of goods, prominently featuring a drop of 5.6% in gasoline wholesale prices from August to September.
These wholesale inflation figures were released just a day after the government reported that consumer prices had risen by only 2.4% over the past year, marking the smallest annual increase since February 2021.
This figure sits just above the Federal Reserve’s targeted inflation rate of 2% and is significantly lower than the staggering 9.1% peak inflation encountered in mid-2022.
Despite these improvements, many Americans still express dissatisfaction with consumer prices, which are still elevated compared to levels before the inflationary pressures began in 2021.
The gradual decline in inflation could be affecting former President Trump’s advantage over economic issues as the presidential election approaches.
Recent surveys suggest that Vice President Kamala Harris may be gaining ground in public perception regarding economic management.
Nevertheless, a majority of voters continue to rate the economy poorly, largely due to the cumulative effects of price surges over the last three years.
The producer price index can provide insights into future consumer inflation trends.
Economists closely monitor this data since specific components, like healthcare and financial services, significantly influence the Federal Reserve’s preferred inflation measurement, the personal consumption expenditures (PCE) index.
A commentary from economist Paul Ashworth noted that the latest PPI data implies the September PCE inflation index could see a 0.2% rise from August, a slight increase from the previous month’s growth rate of 0.1%.
Ashworth indicated that while this projection is “a little hotter than we’ve seen in recent months,” he still anticipates that core price inflation will ultimately align back with the Fed’s target by early next year.
Inflation began to rise prominently in 2021 as the economy rebounded faster than expected from the pandemic-induced recession, leading to significant shortages in goods and labor.
In response, the Federal Reserve implemented eleven interest rate hikes in 2022 and 2023, bringing rates to a 23-year high.
While these elevated borrowing costs were predicted to push the U.S. toward recession, the economy persisted in its growth, and employment rates continued to improve alongside a noticeable slowdown in inflation.
Last month, the Federal Reserve indicated it was successfully curbing inflation, marking a significant decision to reduce the benchmark interest rate by half a percentage point—its first reduction since March 2020, a period when the economy was severely impacted by the pandemic.
Anticipations are for two more rate reductions later this year and an additional four projected for 2025.
