US producer price index down 0.1% in August, up from expected 0.2%

Producer prices in the United States unexpectedly dropped in August, registering their first decline in 1 1/2 year, lower food prices and a range of commercial services offsetting an increase in the cost of energy products.

The Ministry of Labor said Wednesday that its producer price index for final demand fell 0.1 percent last month after remaining unchanged in July. The August decline of the PPI was the first since February 2017.

In the 12 months to August, the PPI rose 2.8% after a further slowdown after rising 3.3% in July.

Economists polled by Reuters had forecast that the PPI would rise by 0.2% in August and grow by 3.2% year-on-year.

A key indicator of the underlying producer price pressures that exclude food, energy and commercial services edged up 0.1% last month. Core PPI gained 0.3% in July.

In the 12 months to August, the core PPI rose 2.9% after rising 2.8% in July.

Despite moderating producer prices last month, headline inflation is steadily rising in the context of a strong labor market and a robust economy. Trump administration's import duties on lumber, washing machines, solar panels, steel and aluminum, as well as on a range of Chinese products, should also increase price pressures.