Ahead of the Bell: US producer prices

Markets Associated Press

The Labor Department reports on U.S. producer price inflation in September. The report will be issued at 8:30 a.m. Eastern Friday.

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SLIGHT RISE IN WHOLESALE PRICES: Economists forecast that producer prices, which are charged by farmers and manufacturers and reflect the cost of goods and services before they reach the consumer, rose 0.2 percent, according to a survey of economists by data firm FactSet. Prices were flat in August and were unchanged during the past 12 months, reflecting the impact of cheaper oil and gasoline.

MODEST INFLATION: Prices have barely stirred over the past year, a sign that inflation remains largely in check despite steady hiring gains. Overall economic growth has been sluggish, while oil prices stuck at roughly $50 a barrel have kept inflation in check.

Many Americans feel squeezed by rising costs for more expensive items such as health care, a college education and housing, but those categories actually make up a relatively small part of the government's inflation measures for consumers.

The Federal Reserve would like to see inflation closer to 2 percent as a hedge against deflation, which would cause a drop in wages and prices that could choke off economic growth.

Yet the Fed's preferred inflation gauge has risen less than 1 percent in the past year. This has made the central bank cautious about raising the short-term interest rate it controls. It increased that rate from a record low near-zero for the first time in nine years last December. The financial markets expect a second rate hike at the upcoming meeting this December.