US August PPI rises 0.4% month-on-month and 5.4% year-on-year

According to data released by the US Department of Labor on Thursday, US wholesale price inflation accelerated further in August. The Producer Price Index (PPI) rose by 0.4% month-on-month in August, higher than July's 0.1%, in line with economists’ expectations. Over the past 12 months, the PPI increased by 5.4% year-on-year. Since some data in the August PPI, including indexes for medical services and airline ticket prices, will be combined with Consumer Price Index (CPI) data to calculate the Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditures (PCE) index, the market is highly focused on this report. Whether the Federal Reserve raises interest rates next week may depend on the specific performance of the August PCE inflation data. Therefore, analysts will closely examine Thursday’s PPI data release to update their forecasts for the PCE. By later Thursday morning, the market is expected to have a basic understanding of how the key sub-components of the PPI will affect the inflation indicator that the Federal Reserve closely monitors. However, until the August CPI data released on Friday is further analyzed, there remains considerable uncertainty in the market’s forecast for the PCE.