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WASHINGTON – A price measure of US companies in August recorded the first monthly decline in about a year and a half.
The producer price index, a measure of the prices that companies receive for their goods and services, decreased by 0.1% in August compared with the previous month. This is the first monthly decline since February 2017, when prices also fell by 0.1%. Excluding the often volatile food and energy categories, prices also declined in August, down 0.1%.
A volatile margin gauge, called commercial services, seems to have led to lower prices last month. Non-trade prices, food and energy edged up 0.1% in August. An underlying measure of commercial services recorded the largest margin since the beginning of 2017.
Economists expected global prices to rise by 0.2% over one month, a 0.2% increase on non-food and energy prices and a 0.2% increase on prices excluding food, energy and commercial services .
A year earlier, overall prices rose 2.8% in August, while non-food and energy prices rose 2.3% and prices excluding food, energy and trade increased 2.9%.
In the longer term, annual gains in the overall index have increased since the beginning of 2016, while the two basic measures have also increased.
"In the future, we are looking for companies to exercise pricing power to the extent possible and pass some of those costs on to consumers," said Gregory Daco, US economist at Oxford Economics. "However, we expect commercial margins to remain under pressure."
The producer price measure generally follows the same trends as other inflation indicators, although it does not always translate into what consumers pay. Signs of possible inflationary pressures have emerged in other recent reports.
The personal consumer price index, an inflation indicator closely monitored by the Federal Reserve, rose 2.3% in July compared to the previous year, the largest increase since early 2012. August unemployment month in a row, a historic low for the measure.
Rising inflation and continuing strong employment growth may lead the Federal Reserve to reconsider its current pace of interest rate increases. The Fed said it plans to raise its basic interest rate twice more before the end of 2018 at meetings in September and December, increasing by 0.25 percentage point. .
Write to Sharon Nunn at [email protected] and Sarah Chaney at [email protected]
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