Producer Prices Rise More Than Expected, Indicating Stronger Demand

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Businesses garnered higher prices for goods and services in September, an indication of rising demand and an easing of deflationary pressures from the pandemic and social distancing rules.

The Producer Price Index, which measures prices received by businesses up and down the production chain right through until final demand goods are sold to consumers, rose four-tenths of a percent in September, double what economists expected and acceleration from last month’s three-tenths of a point gain.

Prices of both goods and services rose four-tenths for the month. Because the service sector is much larger, it accounts for two-thirds of the overall gain.

Compared with a year ago, prices were up 0.4 percent. Prices were down 0.2 percent in August, so this represents a reversal of the deflation that was creeping into the economy due to social distancing and restrictions on business operations intended to fight the spread of the coronavirus.

September’s gains were not driven by food, energy, or changes in business margins. Absent these, prices were still up fourth-tenths. Compared with a year ago, they were up seven-tenths.

Trade services, which measure business margins rather than prices received, moved up two-tenths. Transportion and warehousing prices advanced four-tenths.


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