Producer prices rose at an annual rate of 7.5 percent last month, almost the same as in July, the Bureau of Labor Statistics reported yesterday.
A sharp slowdown in energy price increases helped to reduce the overall gain in wholesale prices, and analysts said they expect further improvement in energy inflation in September.
Food prices inched up by 0.1 percent during August after a dramatic fall in July, while wholesale prices for other consumer goods climbed by 0.6 percent in August compared with a 0.3 percent increase in the previous month.
White House spokesman Larry Speakes commented yesterday, "We find the news encouraging. It indicates continued restraint in prices. It also indicates the importance of continued restraint in federal spending."
The monthly increase in producer prices in August was 0.6 percent, the same as in July, but the annual rate of increase was slightly higher in August. When calculating the annualized rate rise, the Bureau of Labor Statistics uses more detailed figures, and these showed that the August gain was equivalent to a 7.5 percent annual increase, while July's monthly gain was equivalent to an annual rate of 7.1 percent.
A sharp increase in passenger-car prices pushed up the August index. After seasonal adjustment, prices charged by automakers to dealers jumped 2.4 percent in August, following a 0.3 percent increase in July.
Increased auto prices accounted for about one-fourth of the total increase for the month. Car prices normally fall in August as manufacturers give discounts to dealers to help them clear out stocks before the new model year begins. This year, however, there already had been so many rebates and special financing deals to try to push up depressed auto sales that there were no special price cuts in August. Before seasonal adjustment, passenger car prices were up by 0.6 percent last month.
During some months earlier this year, wholesale prices for finished goods actually declined. But now they have resumed their climb, and for the first eight months of the year, these prices increased at an annual rate of just 3.7 percent, the BLS said. Over all of last year, producer prices rose by 7.1 percent.
The main reason for this year's slowdown in inflation is the deep recession, which has held back increases in both wages and prices, particularly the latter. Companies hold their prices down during recessions in an attempt to keep up sales in a shrinking market.
Yesterday's report showed a further fall last month in raw-materials prices, which generally are a good reflection of changes in the economy. These sensitive prices dropped by 0.6 percent in August for the third consecutive monthly decline.
Prices for intermediate goods -- items on which some work has been done but which are not yet at the final stage of production -- declined by 0.1 percent in August, the BLS report said. This followed increases of 0.3 percent in June and 0.4 percent in July. These prices have risen by just 0.3 percent in the last year, while raw-materials prices have dropped by 3.8 percent.
The index for finished goods stood at 282.4 last month, with 1967 prices as 100. This means that a basket of these items that cost $100 in 1967 would cost $282.4 now.
In the year so far, these prices rose by 4 percent. Within the total, consumer food prices climbed by 1.4 percent in the month, energy prices were up by 0.3 percent and prices for other finished consumer goods rose by 5.6 percent. Capital-goods prices, which rose by 0.7 percent in August, were up 5.9 percent over the year as a whole.
Producer prices for finished energy goods increased by 1.2 percent last month, sharply below the increases of 4.1 percent in June and 5.7 percent in July.