Cooling Inflation Points to Slowing in Price Pressures

Wholesale prices in the U.S. remained unchanged last month, signaling that inflation is easing and returning to normal levels after years of affecting American households.
The Labor Department reported on Friday that its producer price index, which measures inflation before it reaches consumers, held steady from August to September.
This follows a 0.2 percent increase the previous month. Year-over-year, the index rose by 1.8 percent in September, marking the smallest rise since February, and down from a 1.9 percent increase in August.
When excluding food and energy prices, which tend to fluctuate, core wholesale prices increased by 0.2 percent from August and 2.8 percent over the past year, up from the 2.6 percent year-over-year increase in the previous month.
Newsweek has reached out to the Labour Department for comment via email.
The increase in service prices was modest, while the price of goods fell. Notably, the wholesale price of gasoline dropped by 5.6 percent from August to September.
This report on wholesale inflation comes just a day after the government announced that consumer prices rose by 2.4 percent in September, year-over-year.
This was the smallest rise since February 2021 and is slighly above the Federal Reserve’s 2 percent target. It is also far below the peak inflation rate of 9.1 percent in mid-2022. Despite the easing inflation, many Americans remain dissatisfied with consumer prices, which are still higher than pre-2021 levels.
The steady decline in inflation could reduce former President Donald Trump’s advantage on the economy in the presidential race. Some surveys show Vice President Kamala Harris is now matching Trump in terms of who voters believe would better handle the economy. However, many voters still rate the economy poorly because of cumulative price increases over the past three years.
The producer price index can provide early insight into where consumer inflation may be heading. Economists also monitor this index because certain components, such as health care and financial services, factor into the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index.
Economist Paul Ashworth of Capital Economics noted in a commentary that Friday’s report on producer prices suggested the September PCE inflation index would increase by 0.2 percent from August, up from a 0.1 percent increase the previous month. Ashworth commented that this would be “a little hotter than we’ve seen in recent months” but added, “We still expect underlying price inflation to continue moderating back to [the Fed’s] target by early next year, but the risks to that view are no longer skewed to the downside.”
Inflation began rising in 2021 when the economy began to rebound from the COVID-19 pandemic, leading to shortages of goods and labor. In response, the Federal Reserve raised interest rates 11 times in 2022 and 2023, pushing them to a 23-year high.
These higher borrowing costs were expected to trigger a recession, but the U.S. economy has continued to grow, and employers have kept hiring, while inflation has gradually slowed.
This article includes reporting from the Associated Press.