The Labor Department reported Friday that a measure of wholesale prices showed no change in September, indicating continued decline in inflation.
The Producer Price Index, which measures what producers get for their goods and services, was flat during the month and rose 1.8% from a year ago. Economists surveyed by Dow Jones were looking for a 0.1% monthly gain after August's 0.2% increase.
Excluding food and energy, the Producer Price Index rose 0.2%, matching expectations, and up 2.8% from a year ago.
The report comes a day after the Labor Department announced that the Consumer Price Index, a widely followed measure of inflation that shows what consumers actually pay for goods and services, rose 0.2% for the month and 2.4% from a year ago.
Markets showed little immediate reaction to the data, with futures pointing to a slight rise on Wall Street while Treasury yields on longer-term securities rose. Stocks rose later in the session, with the Dow Jones Industrial Average adding more than 300 points in the wake of strong bank earnings reports.
Together, these data suggest that inflation is off the blistering pace that peaked more than two years ago, but is still mostly above the Fed's 2% target. Although neither is the Fed's primary measure of inflation, both feed into the personal consumption expenditures price index favored by policymakers. Following these releases, many economists said they expect the personal consumption expenditures deflator to show an increase of about 0.2% or slightly more for the month in which it is released near the end of October.
“The latest PPI and CPI data do not disrupt the low inflation narrative, but they do remind us that we are not on a smooth slope to 2%,” said Oren Klachkin, markets economist at Nationwide Financial.
Separately, a University of Michigan Consumer Survey showed on Friday that sentiment fell in October as near-term inflation expectations increased. The survey's main sentiment indicator fell 1.7% from September, while one-year inflation expectations rose to 2.9%, the highest level since June.
Within the producer price index, a 0.2% decrease in prices for final demand goods offset a 0.2% increase in services. Excluding business services from the core producer price index, the index rose by 0.1%.
A 3% rise in deposit service costs pushed the services index higher, while wholesale prices for professional and commercial equipment fell by 6.3%.
On the commodities side, a 2.7% decline in final energy demand was the main factor in the decline. Likewise, the gasoline index fell by 5.6%, paring gains in the commodity index. Diesel fuel prices fell by 17.6%.
Fed officials in recent days have expressed confidence that inflation is back on target even though some aspects, such as shelter, food and vehicle costs, have remained persistently high. Minutes from the central bank's September meeting indicated that policymakers were divided over the decision to cut the Federal Reserve's benchmark interest rate by half a percentage point.
Most officials say they expect to continue cutting as long as the data indicates that. Markets expect the Fed to cut by a quarter of a percentage point at each of its two remaining meetings this year.
