US producer prices expected to rise 0.1 percent in September as inflation remains tame

MarketsAssociated Press

The Labor Department reports on U.S. producer price inflation in September. The report, which measures price changes before they reach consumers, will be released Wednesday at 8:30 a.m. Eastern.

SLIGHT INCREASE: Economists forecast that the producer price index rose just 0.1 percent in September from the previous month, according to a survey by FactSet. The index was unchanged in August, with wholesale gas prices falling 1.4 percent and food costs dropping 0.5 percent.

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In the 12 months ending in August, producer prices rose only 1.8 percent, slightly below the Federal Reserve's inflation target.

TAME INFLATION: The Fed targets inflation at about 2 percent to protect against deflation, since falling prices could pull down wages and potentially trigger another recession. At the same time, the Fed tries to prevent excessive inflation that would erode the buying power of consumers and businesses.

Inflation has been relatively modest for much of the five-year recovery from the last recession. That's largely because few workers have received significant pay increases, making it more difficult for businesses to charge higher prices.

In August, a separate measure of consumer prices fell 0.2 percent in August, as the cost of gasoline, airline tickets and clothing prices all dropped. Over the past 12 months, consumer prices have risen just 1.7 percent.

An economic slowdown in Europe, China, Japan and elsewhere should further mute inflationary pressures because it's driving the value of the dollar higher. A stronger dollar often reduces the cost of commodities such as oil that the financial markets price in U.S. currency.

Inflationary pressures have also been contained by the meager paychecks for most Americans.

Average hourly pay fell a penny to $24.53 in September That's an increase of less than 2 percent over the past year, meaning pay is barely matching inflation.