U.S. prices at the wholesale level fell unexpectedly in August, recording their first decline in 17 months, as drops in the prices of food and a range of trade services offset an increase in the cost of energy products, the government reported Wednesday. The Labor Department said its producer price index (PPI) fell 0.1 percent last month after being flat in July. The August decline in PPI was the first since February 2017. In the 12 months through August, the PPI increased 2.8 percent, slowing sharply from July's 3.3 percent annual gain. Wholesale food prices fell 0.6 percent last month and have declined for three consecutive months. The cost of services dropped 0.1 percent in August, led by a 0.9 percent plunge in the index for trade services. Wholesale energy prices increased 0.4 percent, with gasoline prices rising 0.6 percent after a 0.1 percent drop in July, when overall energy prices fell 0.5 percent. Core PPI—a key gauge of underlying producer price pressures that excludes volatile energy, food, and trade services—rose 0.1 percent in August after advancing 0.3 percent the previous month. In the past 12 months, the core PPI increased 2.9 percent, up slightly from the 2.8 percent annual pace recorded in July. Despite the unexpected weakness in August PPI, overall inflation has been rising steadily, driven by a tightening labor market and generally strong economy. Economists expect the Trump administration's imposition of tariffs on lumber, washing machines, solar panels, steel, and aluminum, as well as potentially hundreds of billions of dollars worth of Chinese goods, to pressure inflation in coming months, negating wage gains that are just beginning to rise after a long period of weakness.
