US producer prices increase as expected in August; but key details firmer

US producer prices rose as anticipated in August, driven by higher costs of goods, airline fares, and hospital services. This increase bolsters the likelihood of an interest rate hike from the Federal Reserve in the upcoming week. The Labor Department's data, released on Thursday, supports the case for rate hikes among those on the Committee.

August's Consumer Price Index data, expected on Friday, will provide further insight into the inflation situation and influence interest rate expectations. The Producer Price Index for final demand increased 0.4% in August, following a revised 0.1% gain in July. Energy prices, including gasoline and diesel, saw significant gains, contributing to the overall rise in producer prices.

The conflict with Iran has led to higher oil prices, putting upward pressure on energy costs. While the overall rise in prices was modest, key components such as transportation costs and airline fares experienced notable increases. These factors have not been affected by recent methodology changes in the calculation of the Personal Consumption Expenditures Price Index.

Economists estimate that core PCE inflation may have risen by 0.3% in August, with the likelihood of a 25-basis-point rate hike at the Federal Reserve's September meeting now at approximately 70%.