Bloomberg News

Wholesaler Prices in U.S. Were Little Changed in August

September 14, 2011

(Updates with economist’s comment in fourth paragraph.)

Sept. 14 (Bloomberg) -- Wholesale prices in the U.S. were little changed in August as costs decreased for energy and automobiles.

The producer price index was unchanged after a 0.2 percent increase in July, Labor Department figures showed today in Washington. Economists projected no change, according to the median estimate in a Bloomberg News survey. The so-called core measure, which excludes volatile food and energy, rose 0.1 percent, less than forecast.

Slowing growth overseas and in the U.S. is helping restrain raw-material costs, underscoring Federal Reserve Chairman Ben S. Bernanke view that price gains are “transitory.” Cooling prices make it easier for policy makers to take additional steps when they meet next week to keep the economy expanding.

“Inflation is cooling and that will provide some relief for consumers,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected no change in August producer prices. “With inflation seeming to crest, it gives the Fed a freer hand.”

Retail sales in August unexpectedly stagnated as a lack of jobs restrained shoppers, highlighting the risk the economy will stall. The unchanged reading followed a 0.3 percent gain for July that was smaller than previously estimated, Commerce Department figures showed in Washington.

Index Futures

Stock-index futures trimmed gains after the reports. The contract on the Standard & Poor’s 500 Index expiring in December rose 0.8 percent to 1,174.6 at 8:45 a.m. in New York after rallying as much as 1.2 percent earlier.

The median estimate for producer prices was based on forecasts from 77 economists. Projections ranged from declines of 0.6 percent to increases of 0.9 percent.

Compared with August 2010, companies paid 6.5 percent more for goods last month, the smallest gain since April, after a 7.2 percent rise in July.

Wholesale prices excluding volatile food and energy costs, were projected to rise 0.2 percent from the prior month, the Bloomberg survey showed. Core wholesale prices climbed 2.5 percent in the 12 months ended in August.

Tire Prices

The biggest price gain for tires since April accounted for more than 20 percent of the increase in the core measure, the Labor Department said. Higher costs for radio and television communications equipment also contributed to the gain in the core index. Tire prices climbed 1.4 percent.

Fuel costs fell 1 percent, reflecting declines for liquefied petroleum gas, diesel, heating oil and gasoline, today’s report showed. The cost of finished consumer foods rose 1.1 percent, the most since February, led by eggs and poultry. Processed poultry costs rose the most since August 2006.

Expenses for intermediate goods decreased 0.5 percent from the prior month, the first decline since July 2010, while prices of crude goods rose 0.2 percent.

Lowe’s Cos. Inc., the second-largest home-improvement retailer, has been raising its prices on some goods as it sees increased costs from vendors.

“Vendors are coming forward with price-increase requests,” Robert Gfeller, executive vice president for merchandising at Lowe’s, said in a teleconference Sept. 7. “Our approach is to negotiate as hard as we can to the lowest cost possible. Where we have taken (increased) pricing, we have moved some through to retail.”

Vehicle Costs

The cost of passenger cars dropped 0.4 percent in August, today’s report showed.

Toyota Motor Corp. is among carmakers offering lower prices after inventories recovered following the earthquake and tsunami in March. The Toyota City, Japan-based automaker is starting a blitz of U.S. model releases, some of them with cheaper price- tags, to regain sales lost to rivals such as Hyundai Motor Co. after three years that included recession, recalls and the earthquake.

Toyota last month unveiled the 2012 Camry in Hollywood, California, with price reductions ranging from $200 to $2,000 on the top-end, four-cylinder Camry, Bob Carter, group vice president of U.S. sales, said in an interview.

“We see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy,” Bernanke told the Economic Club of Minnesota last week. “Inflation is expected to moderate in the coming quarters,” he said, citing the waning of “transitory” influences like high fuel prices and global supply disruptions linked to Japan’s disaster.

Preferred Gauge

The Fed’s preferred price gauge, which excludes food and fuel, rose 1.6 percent in July from a year earlier after climbing 0.9 percent in 2010. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent, according to their June forecast.

Producer prices, one of three monthly inflation gauges reported by the Labor Department, are calculated based on costs on the Tuesday of the week containing the 13th of the month, which may influence month-to-month changes.

Prices of goods imported into the U.S. fell 0.4 percent in August from the prior month, Labor Department data showed yesterday. Costs advanced 13 percent from August 2010.

Consumer prices, the broadest of the three measures, rose 0.2 percent in August, as did the core index, according to the median forecasts of economists surveyed by Bloomberg before a Labor Department report tomorrow.

--Editor: Vince Golle

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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