U.S. producer prices unchanged, underlying inflation firming

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U.S. producer prices were flat in August as the cost of energy products declined and trade services fell, but underlying producer inflation firmed.

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The Labor Department said on Thursday the unchanged reading in its producer price index for final demand followed a 0.4 percent drop in July. In the 12 months through August, the PPI was unchanged after decreasing 0.2 percent in July.

Economists polled by Reuters had forecast the PPI nudging up 0.1 percent last month and gaining 0.1 percent from a year ago.

Producer prices have been dampened by a strong dollar and cheaper oil. But some of the drag is easing with the dollar rally appearing to have peaked early this year and oil prices having pushed off multi-decade lows.

Inflation has persistently undershot the Federal Reserve's 2 percent target, also constrained by sluggish wage growth.

Last month, trade services - which measure changes in margins received by wholesalers and retailers - fell 0.6 percent after declining 1.3 percent in July. Energy prices fell 0.8 percent after dropping 1.0 percent in July.

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Healthcare costs increased 0.4 percent last month after rising 0.3 percent in July. The cost of doctor visits, dental and hospital outpatient care also rose. Healthcare costs feed into the Fed's preferred inflation measure, the core personal consumption expenditures (PCE) index.

A key gauge of underlying producer price pressures that excludes food, energy and trade services increased 0.3 percent month after being unchanged in July.

The so-called core PPI increased 1.2 percent in the 12 months through August, the biggest gain since December 2014. It increased 0.8 percent in June.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)