Services Sector Prices and Store Margins Indicate Economic Lift In August

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U.S. producer prices rose more than expected in August, buoyed by a bounce in the prices businesses received for services.

The higher than expected figures indicate solid demand in August and point toward a recovery for the services sector after the pandemic’s staggering blows.

The Labor Department’s Producer Price Index, a measure of the prices businesses receive for their goods and services, rose 0.3 percent in August. That beat the o.2 percent gain forecast by economists. The index rose 0.6 percent in July.

The August increase was led by a 0.5 percent rise in the index for services, matching the July gain. Compared with a year ago, services prices were up 0.4 percent. Trade services, which measures marks up rather than prices, rose 1.2 percent, indicating that merchants saw strengthening demand in August. This accounted for two-thirds of the overall gain in the sector, the Bureau of Labor Statistics said.

The index for final demand services less trade, transportation, and warehousing moved up 0.3 percent. Transportation and warehousing prices rose 0.2 percent.

The BLS also said that nearly 20 percent of the August advance in prices for final demand services is attributable to a 1.1-percent increase in margins for machinery, equipment, parts, and supplies wholesaling. The indexes for automobiles and automobile parts retailing, trucking, and food services also moved up.

The uptick in the prices of goods can be attributed to a 0.3-percent advance in the index for goods less foods and energy, volatile categories that are often excluded when economists look for inflation trends. Prices for foods fell 0.4 percent, and the index for dropped 0.1 percent.
Compared with a year ago, the producer price index is down 0.2 percent. The index for services is up 0.4 percent over the year while the index for goods is down 1.6 percent. The index for service outside of margins, warehousing, and transportation is up 0.6 percent for the year.


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