When it comes to prices, businesses are in the same boat as consumers: facing higher costs because of rising fuel prices.
- Wholesale prices rose 0.7% in August as measured by the Producer Price Index, the largest jump since June 2022.
- The increase was driven by a rise in fuel prices.
- Producers could pass those costs on to consumers, especially if diesel costs drive up prices all along the supply chain.
Wholesale prices rose 0.7% in August from July, the steepest monthly increase since June 2022, the Bureau of Labor Statistics said Thursday. The jump in the Producer Price Index (PPI) was mainly because of higher energy prices.
The cost of fuel has risen this summer because oil-producing countries are restricting supplies. The rise in the PPI was higher than the 0.4% increase forecasters polled by the Dow Jones Newswires and the Wall Street Journal had expected.
The report sent mixed messages on the path of inflation. Outside of food and energy costs which are prone to up-and-down swings, producer prices only rose 0.3%, the same as in July. The PPI has showed only modest increases lately, and as of August, had only gone up 1.6% over the last 12 months. However, those higher fuel prices could be contagious, especially if diesel fuel rises further.
“Diesel is a critical fuel for trucking, shipping, construction and agriculture. Therefore, higher fuel costs will ripple across the supply chain, affecting service providers,” Bernard Yaros, an economist at Moody’s Analytics, wrote in a commentary.
In contrast to the Consumer Price Index (CPI), which measures what consumers pay, the PPI for final demand measures prices that domestic producers receive for selling things to the public, the government, other companies and overseas. Many economists look to the PPI for clues about the path of inflation, since the PPI tends to influence the CPI down the road.