Wholesale inflation slowed again last month

US producer prices continued to cool overall in August, showing that inflation across the economy is improving. But a closely watched measure of underlying inflation remained stubbornly elevated, reflecting the bumpiness in reining in price hikes.

The Producer Price Index, which measures average price changes seen by producers and manufacturers, was 1.7% for the 12 months ended in August, a slowdown from the 2.1% increase seen in July, according to Bureau of Labor Statistics data released Thursday.

On a monthly basis, prices rose 0.2%, a faster pace than in July, when prices were flat. August’s monthly increase was driven by a 0.4% gain on the services side, as goods prices were unchanged, thanks in part to falling energy prices.

Economists had expected that prices would increase 0.2% on a monthly basis and 1.8% annually, according to FactSet estimates.

PPI serves as a potential bellwether for retail-level inflation in the months ahead. On Wednesday, the Consumer Price Index cooled to its lowest rate since February 2021 but also showed that some inflation pressures — specifically, housing-related costs — remain stubbornly elevated.

Excluding the more volatile categories of food and energy, core PPI advanced 0.3% from July, countering a 0.2% decline seen the month before. That pushed the annual rate to 2.4%, from 2.3%, according to the report.

This is the last inflation report the Federal Reserve will have in hand before officials hold their monetary policy meeting next week, where they are expected to announce a quarter-point rate cut after hiking rates to a 23-year high in a prolonged battle to bring down elevated prices.

This story is developing and will be updated.