WASHINGTON -- U.S. wholesale prices rose a mild 0.2 percent last month, held down by lower food and energy costs, suggesting that inflation remains in check despite the economy's robust growth.
The Labor Department said Wednesday that its producer price index -- which measures inflation before it reaches consumers -- rose 2.6 percent compared with a year earlier, the smallest increase since January. Wholesale prices rose in September after two months of flat or declining readings.
Excluding the volatile food and energy categories, core wholesale prices rose 0.2 percent in September and 2.5 percent from a year earlier.
Inflation has crept higher this year, eroding the value of Americans' paychecks. Yet core prices remain close to the Federal Reserve's target of 2 percent and have yet to show signs of rapid acceleration.
There were some signs of rising costs in Wednesday's report: Transportation and warehousing prices rose 1.8 percent, the largest monthly gain in nearly nine years. That reflected a 5.5 percent jump in the category of airline passenger services, also a high in figures dating to 2009, while rail transportation of freight and mail was up 1.4 percent, the most since 2012.
Wholesale food costs fell 0.6 percent last month and gas prices dropped 3.5 percent.
The Federal Reserve is keeping a close eye on price changes as it monitors the economy for signs of overheating. The unemployment rate fell to a 49-year low of 3.7 percent last month, which could spur greater wage increases in the coming months. Companies may then have to raise prices to offset the costs of higher pay.
So far, there is only limited evidence that such a trend is emerging. Average hourly pay has picked up but is still increasing at a modest pace. The Fed's preferred inflation gauge increased just 2.2 percent in August, the latest data available, down slightly from a 2.3 percent annual gain the previous month.
Overall, services prices increased 0.3 percent while the cost of goods fell 0.1 percent, reflecting declines in food and energy. The decrease in goods prices was the first since May 2017.
While the figures -- which highlight wholesale and other selling prices at businesses -- are less prominent in investors' minds than the consumer price index out today, they illustrate how changes in input costs are feeding into inflation. Producer price reports have limited usefulness in predicting the monthly consumer price index, JPMorgan Chase & Co. economists said in a recent note.
As trade tariffs and retaliatory levies fly, inflation pressures are being closely watched, particularly for signs of how likely they filter through production pipelines and on to businesses and consumers. Benchmark Treasury yields have climbed to multiyear highs this month as investor expectations rise that the Federal Reserve will continue raising interest rates to the point of eventually restricting growth.
Information for this article was contributed by Christopher Rugaber of The Associated Press and by Jeff Kearns of Bloomberg News.
Business on 10/11/2018