The numbers: The wholesale cost of U.S. goods and services snapped back in September, but the level of inflationary pressure appears to have eased, at least temporarily.
The producer price index climbed 0.2% last month, springing back from the first decline in a year and a half, the Labor Department said Wednesday. The increase matched the forecast of economists polled by MarketWatch.
The increase in wholesale inflation over the past year, however, slowed again to 2.6% from 2.8%. The 12-month rate hit a seven-year high of 3.4% just four months ago.
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The cost of partly finished and raw materials were also muted, suggesting a big move in either direction in wholesale inflation probably won’t happen soon.
What happened: The cost of services rose 0.3%, but mostly in parts of the economy that are hard to measure and prone to sharp swings.
The wholesale cost of airline flights, for example, posted the biggest advance since records began being kept in 2009. While the increase likely reflects higher fuel costs, passengers almost certainly won’t see such a large price hike on plane tickets.
The wholesale cost of goods, meanwhile, fell by 0.1%. Food and gasoline prices both declined, though the drop in fuel almost certainly won’t last.
Stripping out food, energy and trade margins, the so-called core rate of wholesale inflation surged 0.4%.
Despite such a sharp increase last month, the 12-month rate of core inflation remained flat at 2.9%.
Big picture: Wholesale inflation has shot up from basically zero a few years ago to a yearly rate of almost 3% now, reflecting a broad upsurge in prices tied to the surging U.S. economy.
The big question is whether inflation will continue to rise. Lately wholesale costs have tapered off, but higher gas prices are likely to prevent it to drop much further.
U.S. tariffs on steel and other foreign goods and retaliatory sanctions by targeted nations have also raised the cost of other goods critical to the economy.
Still, the Federal Reserve is sticking to its forecast that overall inflation will remain around its target 2%, allowing it to carry on with its current strategy of gradually raising U.S. interest rates.
Market reaction:The Dow Jones Industrial Average DJIA, -0.21% and S&P 500 SPX, -0.14%were set to open lower in Wednesday trades. The Dow has retreated recently after setting a record high late last week.
The 10-year Treasury yield TMUBMUSD10Y, +0.74% rose to 3.23% and remains at a seven-year high. Higher inflation and the strong economy are nudging the Fed to raise interest rates.
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