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Inflation Remains Tame; Consumer Sentiment Falls

Posted by Unknown on Friday, August 15, 2014


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Economy |Producer Prices Up Slightly; Consumer Sentiment Falls



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WASHINGTON — Producer prices rose marginally in July as a decline in the cost of energy offset higher food prices, pointing to a moderation of inflation pressures at the factory gate.


Other data on Friday showed that consumer sentiment fell in August to its lowest level since November.


The Labor Department said its Producer Price Index edged up 0.1 percent, in line with economists’ expectations, after a 0.4 percent rise in June. In the 12 months through July, producer prices increased 1.7 percent after rising 1.9 percent in the year to June.


“There is still no inflation pressure out there right now,” said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh. “We are still seeing expansion in manufacturing, but at a slower pace. Manufacturing will remain a positive for the U.S. economy into 2015.”


Producer inflation data has been volatile since the government revamped the index at the start of the year to include services and construction. Swings in prices received for trade services, a gauge of margins for retailers and wholesalers, have made it hard to see a clear trend in producer prices.


Over all, inflation has risen in recent months, a fact acknowledged by the Federal Reserve at its July policy meeting. The central bank, which had repeatedly warned that price pressures were too low, said the likelihood of inflation running persistently below its 2 percent target had diminished somewhat.


Producer prices were held back last month by declining energy prices. Gasoline prices fell 2.1 percent in July after increasing 6.4 percent in June. Food prices increased 0.4 percent last month.


Prices received for services nudged up 0.1 percent in July after rising 0.3 percent in June.


Producer prices excluding food and energy gained 0.2 percent, matching June’s increase. In the 12 months through July, that measurement rose 1.6 percent, compared with an increase of 1.8 percent in the year to June.


Producer prices excluding food, energy and trade services increased 0.2 percent last month, the same increase as in June.


In addition, the Thomson Reuters/University of Michigan’s preliminary August reading on consumer sentiment was 79.2, compared with a final reading of 81.8 in July.


The median forecast of economists polled by Reuters was 82.5. July’s reading was the lowest one since a 75.1 in November 2013.


“While the data implies differential prospects for retailers,” said Richard Curtin, survey director, “consumer confidence remains at moderately positive levels, high enough to support a continued expansion in personal consumption during the year ahead.”



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