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US producer prices fall shy of forecasts ahead of Harvey, Irma

By Alexander Bueso

Date: Wednesday 13 Sep 2017

US producer prices fall shy of forecasts ahead of Harvey, Irma

(ShareCast News) - Producer prices on the other side of the Pond fell shy of forecasts again last month, but economists warned a surge was soon likely even as the effects of recent hurricanes drowned out the underlying signals, as with other data recently.
More significantly, the underlying trend was seen as higher as sustained stronger readings on factory gate inflation in China fed through into the US data.

So-called total final demand prices rose by 0.2% month-on-month in August, following July's 0.1% dip, according to the Department of Labor.

That was below the consensus projection for an increase of 0.3%. Prices were also weaker than expected at the core level, with an advance of 0.2% (consensus: 0.3%).

Versus July, inflation picked-up in both goods and services, with the former jumping by 0.5% - driven a 9.3% jump in gasoline prices - after a fall of 0.1% in the prior month, while in services they were up by 0.1%, bouncing back from a 0.2% fall.

Nevertheless, in year-on-year terms, total producer prices were ahead by 2.4%, up from a 1.9% rate of gains in the month before, with core prices ahead by 1.9%, for a flat reading on the month before.

Looking out to the next few months, Ian Shepherdson, chief economist at Pantheon Macroeconomics, said he was braced for a spike in core producer prices, as reconstruction activity boosted prices.

Correcting for that surge, Shepherdson said: "The underlying trend has been hovering around 2% year-on-year in recent months, though even without the storms we'd be expecting a modest pick-up as goods prices respond to the sustained increase in China's PPI."

Economists at Barclays also spied the potential for pipelines pressures to mount, but said: "We expect pipeline price pressures to remain moderate, reflecting the fact that the headwind from imported inflation and global commodity prices has abated in recent months."

Ahead of Thursday's US CPI data, Barclay's Blerina Uruci forecast a "soft" 0.4% rise at the headline level to 1.9% on the year and a "firm" 0.1% gain in core prices.

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