US Producer Prices Dip, Cooling Inflation Signals Possible Fed Cuts

Lead US Producer Price Index for final demand fell 0.1 percent in August, while core PPI excluding food and energy rose 0.3 percent, signaling easing producer prices and boosting expectations of imminent Federal Reserve rate cuts.

Nut Graf The Bureau of Labor Statistics’ August PPI release showed weaker-than-expected inflation at the producer level, underpinning market bets on September rate reductions and driving equity futures higher.

Main Part

Headline Data

• Final demand PPI: -0.1 percent month-on-month (MoM) vs. +0.3 percent expected; +2.6 percent year-on-year (YoY).
• Core PPI (ex-food & energy): +0.3 percent MoM vs. +0.3 percent expected; +2.8 percent YoY.

Market Reaction

• S&P 500 and Nasdaq futures extended gains following the report, reflecting increased odds of a Fed policy shift.
• Traders now price in a series of Fed rate cuts beginning this week and continuing through year-end to support growth amid softening inflation.

Sector Highlights

• Final demand services prices declined 0.2 percent, led by a 1.7 percent drop in wholesaler margins for machinery and vehicle products.
• Final demand goods inched up 0.1 percent, driven by higher prices for tobacco products (+2.3 percent) and processed poultry.
• Energy prices fell 0.4 percent; food prices rose 0.1 percent.

Outlook With producer inflation cooling more than anticipated, the Fed faces mounting pressure to pivot from its tightening campaign. Upcoming consumer price data and the Fed’s policy meeting later this month will further clarify the monetary path.