On August, US PPI increased by 1.7% year-on-year, hitting a 2-month low, slightly exceeding expectations on a month-on-month basis

In August, the US PPI rose slightly by 1.7% year-on-year, with the Fed's preferred inflation gauge, the "Personal Consumption Expenditures Price Index," showing moderate performance. Inflation pressure is easing, and the market still expects the Fed to cut interest rates by 25 basis points next week.

On Thursday, September 12, the US Bureau of Labor Statistics (BLS) released data showing that the US PPI in August increased by 1.7% year-on-year, meeting expectations and hitting the lowest level since February; it rose by 0.2% month-on-month, higher than the expected 0.1%; at the same time, the July PPI was revised down from 2.2% to 2.1%, further indicating easing inflation pressure.

Excluding food, energy, and trade services, the core PPI in August increased by 2.4% year-on-year, meeting expectations and higher than the previous value of 2.3%; it rose by 0.3% month-on-month, higher than the expected 0.2%.

After the data was released, stock index futures gave up gains, US bond yields edged lower, as investors continued to bet that the Fed would cut interest rates by 25 basis points at the upcoming meeting.

Service Sector Drives PPI Increase

In August, service prices rose by 0.4%, rebounding from a 0.3% decline in July. BLS pointed out that a 4.8% increase in the cost of renting accommodation was a "major factor" in the rise in service prices this month.

Additionally, price indices for wholesale machinery and vehicles, retail of automotive fuel and lubricants, residential real estate loans (partially), wholesale of professional and commercial equipment, and retail of furniture also increased. However, prices for air passenger services fell by 0.8%, and prices for food and alcoholic beverages retail, as well as membership fees, entrance fees, and entertainment facility usage fees (partially), declined.

In August, commodity prices remained unchanged, after a 0.6% increase in July, with a significant 0.9% decline in energy costs limiting the overall growth of commodity prices.

Among them, prices of non-electronic cigarettes rose by 2.3%; prices of eggs, gasoline, diesel, and drugs also increased. On the other hand, aviation fuel prices dropped by 10.5%; prices of meat, electricity, hay, grass seeds, oilseeds, and non-ferrous waste materials also decreased.

Market Continues to Bet on Fed Cutting Rates by 25 Basis Points This Month

Wholesale inflation data shows that due to the rise in housing costs, potential inflation accelerated in the US in August. Nevertheless, with cost pressures easing in recent months and concerns about labor market downturn intensifying, the market still expects the Fed to start cutting rates next week.

The Fed's preferred inflation gauge, the "Personal Consumption Expenditures Price Index," showed a mild performance. Indices measuring portfolio management fees, doctor care, and hospital inpatient care costs remained unchanged, while airfare prices dropped by 0.8%