US business prices rose by 0.3% in August, as expected, reflecting gains in trade services and the core components, offset by declines in food and energy prices.
Even with the monthly gains, the Federal Reserve’s shift away from inflation concerns remains well founded. Price levels have barely moved from a year ago.
Food prices were down 0.4%, the third straight decline and the sixth monthly drop in the last six months. Sharp declines in fruits and beef were the key factors.
Energy prices posted a 0.1% decline in August, led by a 1.4% drop in gasoline prices and a 38.1% plunge in home heating oil prices. Energy prices fell sharply during the shutdown due to lack of demand, so the year/year rate stands at a 12.4% decline.
Excluding the volatile food and energy components, PPI was up 0.4%, slightly ahead of the 0.3% increase expected. The BLS’s preferred core measure, which also excludes a 1.2% increase in trade services prices, rose by 0.3% in the month.
Trade services prices were boosted by margins on machinery, equipment, parts and supplies. Prices of completed vehicles also rose in the month, boosting the core reading.
Overall PPI prices stand 0.2% below their year ago level, while prices excluding food and energy were up 0.6%. Both were above the year/year rates posted in July, but were down significantly from the 12-month rates in the pre-COVID period.
In other data released Thursday, initial jobless claims were unchanged at 884,000 in the September 5 week, above the 830,000 level expected.
The four-week moving average fell to 970,750, the lowest since the beginning of COVID. The average will continue to decline over the next few weeks until the levels prior to the seasonal adjustment changes roll out.
The level of continuing claims rose by only 93,000 to 13.385 million in the August 29 week after falling by 1.20 million in the previous week, maintaining the general downward trend. The same seasonal adjustment changes are impacting continuing claims.