Weak US producer inflation supports case for Fed rate cut

WASHINGTON: US producer prices unexpectedly fell in September, leading to the smallest annual increase in nearly three years, likely giving the Federal Reserve further room to cut interest rates for the third time this year in October.

In the 12 months through September the PPI increased 1.4 per cent, the smallest gain since November 2016, after rising 1.8 per cent in August. Economists polled by Reuters had forecast the PPI nudging up 0.1 per cent in September and advancing 1.8 per cent on a year-on-year basis.Excluding the volatile food, energy and trade services components, producer prices were unchanged last month after jumping 0.4 per cent in August. The so-called core PPI increased 1.

A report on Tuesday from the National Federation of Independent Business showed confidence among small businesses dropped in September. The NFIB said the trade war was"adversely impacting many small firms," noting that"owners are more reluctant to make major spending commitments." "The drop in the PPI in September does lend some downside risk to the CPI forecast," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.In September, wholesale energy prices fell 2.5 per cent, matching August's decline. They were pulled down by a 7.2 per cent decline in gasoline prices, which followed a 6.6 per cent drop in August.

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