Cooler US producer inflation hints at softening demand

Core Insights - U.S. producer prices unexpectedly fell in August, indicating that domestic firms may be absorbing some of the tariffs on imports [1][2] - The lack of strong producer price pressures suggests softening domestic demand amid a struggling labor market, leading to expectations of an interest rate cut by the Federal Reserve [2][3] Producer Price Index (PPI) Trends - The Producer Price Index for final demand decreased by 0.1% in August, following a downwardly revised increase of 0.7% in July, contrary to economists' expectations of a 0.3% rise [3][4] - A 0.2% drop in services prices contributed to the PPI decline, primarily due to a 1.7% decrease in margins for trade services [4] Retailer Pricing Strategies - Retailers appear to be absorbing tariff costs, as indicated by commentary from second-quarter earnings reports, although they may need to start selectively increasing prices in the future [5] - The cost of services excluding trade, transportation, and warehousing rose by 0.3%, while transportation and warehousing services prices increased by 0.9% [5] Goods Price Movements - Goods prices edged up by 0.1% after a 0.6% increase in the previous month, with food prices also gaining 0.1% [7] - Significant price increases were noted in wholesale beef (up 6.0% month-over-month and 21.1% year-over-year) and coffee (up 6.9% month-over-month and 33.3% year-over-year) [7]