U.S. producer prices unexpectedly fell 0.1% in August, driven by a decline in service costs, signaling easing inflationary pressures.
The Labor Department’s Bureau of Labor Statistics reported that this drop followed a downwardly revised 0.7% increase in July, defying economists’ expectations of a 0.3% rise.
Prices for services decreased 0.2% in August after rebounding 0.7% in July, while goods prices edged up 0.1%, a slowdown from last month’s 0.6% gain.
On an annual basis, the Producer Price Index (PPI) rose 2.6% through August, down from July’s 3.1%, reflecting a broader moderation in inflationary pressures across sectors.
Economists caution that tariffs may still contribute to higher consumer prices in August, despite the overall slowdown in producer costs. The interplay of tariffs and easing PPI data will be closely watched as policymakers assess inflation trends.
The Federal Reserve is widely expected to cut interest rates by a quarter-percentage point next Wednesday, reversing a pause in its easing cycle since January.
The anticipated cut is fueled by labor market weakness, highlighted by revised government data showing the economy created 911,000 fewer jobs in the 12 months through March and near-stalled job growth in August.
Recent employment reports, including the first mid-year job losses in four and a half years, underscore growing concerns over economic stagnation. Investors and analysts will closely monitor upcoming Fed actions for signals on managing inflation while supporting growth.
