The producer price index inched up 0.6% in October with about a third of the increase coming from higher gasoline prices.
This followed a 0.5% increase in September and a 0.7% increase in August, according to a report by the Bureau of Labor Statistics on Tuesday.
Still, October’s increase remained below the summer’s peak of 1% in July, while comparisons to the low levels of a year ago faded as the year-over-year price index for final demand stayed unchanged at 8.6% in October.
The core index—excluding food and energy—posted a 0.4% increase in October after advancing by 0.2%, a nine-month low, in the prior month. On a year-over-year basis, the core index was also unchanged at 6.8%.
The report also showed that input prices continued to pressure prices for final demand that reached consumers as supply bottlenecks persisted.
All price levels, from Stage 1 to Stage 4 of the production flow, increased, with Stage 2 posting the largest increase of 4.7% in October.
As a result, producers are having to balance rising costs and maintain their profit margins without losing consumers when raising final prices.
Prices for trade services—a proxy for wholesale and retail margins—decelerated on the month, posting a 0.4% increase after rising by 0.9% in September.
This suggests that while solid consumption demand continued to offset some negative impact from rising prices, the profit margin growth has been slowing down significantly.
The takeaway
Data on the producer price index confirmed that energy prices will most likely play a key role in the widely followed consumer price index report that will be released on Wednesday.
And because the PPI does not include owners’ equivalent rent, a significant portion of the CPI, we expect consumer prices to advance at a faster rate in October.
