Wholesale prices rise slightly in August, as the Federal Reserve weighs rate increase

Wholesale prices rose 0.4% in August, the government said Thursday in a key inflation report that aligned with expectations.

The Bureau of Labor Statistics said the Producer Price Index, or PPI, rose 5.4% for the year ending in August.

The PPI measures what domestic producers receive for their products and is considered a leading indicator of inflation.

The bureau said higher energy costs drove much of the monthly increase. Turmoil in the Middle East pushed oil prices above $100 per barrel this week, and the average U.S. cost of diesel fuel is hitting all-time highs.

"Over a third of the August increase in the index for final demand goods can be traced to prices for diesel fuel, which jumped 24.1%," the bureau said. "The indexes for gasoline, jet fuel, home heating oil, candy and nuts, and tobacco products also advanced."

The producers' index is one of two major releases this week that will offer key signals on inflation. Officials will release the closely watched Consumer Price Index, which measures what customers pay for goods and services, on Friday.

Steve Hanke, a professor of applied economics at Johns Hopkins University, said the elevated PPI level did not surprise him, given surging signals in a separate economic model known as the Divisia 4, a broad measure of the money supply.

Further, he said, "Trump's tariffs, his war of choice on Iran, and the ongoing conflict in Ukraine have also contributed to the PPI surge."

The cost of living is the prime concern for voters who will reshape Congress in the midterm elections this November.

Democrats say President Trump failed to tame prices as promised and kept them elevated through tariffs, or duties on foreign goods, and his war on Iran, which increased oil and gasoline prices.

Stocks traded in negative territory for a third straight day Thursday due to persistently high oil prices.

Mr. Trump says prices will come down once the conflict with Iran is over, and that short-term pain is worth the goal of preventing Tehran from having a nuclear weapon.

Speaking at the GOP midterm convention late Wednesday, Mr. Trump said he is bringing prices "way down," pointing out the price of eggs is far lower than when he took office. He also promised to give every adult citizen a "dividend" of $5,000 if the Republicans retain the House and Senate in November — a pledge that could cost north of $1 trillion.

This week's inflation readings will influence whether the Federal Reserve raises interest rates at its Sept. 16 meeting to control inflation.

The Fed, which analyzes an array of inflation indexes, uses an inflation target rate of 2%.

Forecasters say central bankers could increase rates slightly, even as Mr. Trump pushes for a cut.

The European Central Bank authorized a rate increase on Thursday to tame inflation driven by the Iran war.

Correction: An earlier version of this story had an incorrect reading for the annual PPI ending in August. The correct figure is 5.4%.

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