We take our good news when and where we find it. In this case, it's not a dramatic, earth-shaking event, but it's an interesting piece of economic news: Wholesale prices dropped in August, slightly - but maybe enough.
Wholesale prices surprisingly fell slightly in August, providing breathing room for the Federal Reserve to approve an interest rate cut at its meeting this month, according to a Bureau of Labor Statistics report Wednesday.
The producer price index, which measures input costs across a broad array of goods and services, dropped 0.1% for the month, after a downwardly revised 0.7% increase in July and well off the Dow Jones estimate for a 0.3% rise. On a 12-month basis, the headline PPI saw a 2.6% gain.
As noted, this gives the Fed another reason to drop interest rates. This could affect housing costs, not from a supply and demand standpoint - that remains the most significant problem - but at least from the financing point of view. Lower interest rates place marginally higher-cost homes within the financial reach of those, most especially young people, who could not otherwise afford them. Lower interest rates have, historically, fueled business investment, new and used-car sales, and pretty much any economic activity that involves credit.
This is also an indication of decreasing inflation rates.
The core PPI, which excludes volatile food and energy prices, also was off 0.1% after being expected to climb 0.3% as well. Excluding food, energy and trade, the PPI posted a 0.3% gain and was up 2.8% from a year ago.
Stock market futures gained after the release while Treasury yields were slightly negative.
The release comes a week ahead of when the central bank’s Federal Open Market Committee releases its decision on its key overnight borrowing rate.
All of this may well be a mixed blessing. Lowering wholesale prices might also be a sign of a slump in manufacturing, a drop in demand. But that wouldn't seem to be the case here. Energy costs are gradually coming down, President Trump's tariffs don't seem (yet) to be affecting the slowly-dropping inflation rates, and the Consumer Confidence Index has remained steady for several months.
Read More: Producer Prices Surged Nearly 1 Percent in July, Largest Jump Since 2022
Once Again Trump Was Right - Biden Team Was Wrong (or Lying) About Jobs
We should note that President Trump has been pushing for the Fed to lower interest rates:
For his part, Trump has badgered the Fed to reduce rates, insisting that tariffs will not be inflationary and the economy needs lower rates both to spur growth and to cap financing costs for the swelling national debt.
So, a bit of interesting news, and one that has us very interested indeed to see what the Fed will do next week, when they are expected to meet to discuss (among other things) a rate cut. Predictions are hard to make, mind, especially about the future. Economic predictions are even harder. A nation's economy is a vast, far-ranging thing, and much like the Earth's climate, it's chaotic, largely beyond our understanding to truly understand - or plan. But we can look at indications. Right now, the indications are good enough. If the Fed drops the overnight rate next week, it may well look even better a month from now.
Editor's Note: President Trump is leading America into the "Golden Age" as Democrats try desperately to stop it.
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