Washington (United States) (AFP) – US wholesale inflation picked up more than expected in August, government data showed Thursday, driven by higher energy costs in the month—particularly for diesel—as the US war with Iran continued. Rising prices at the pump are squeezing US households and businesses weeks ahead of key midterm elections, pressuring President Donald Trump’s administration, as average diesel costs hit new highs.
The Producer Price Index (PPI) was up 5.4 percent year-on-year last month, the Department of Labor said. This was a significant acceleration from the 4.8 percent rise in July and above the 5.3 percent that economists expected in a consensus forecast published by MarketWatch. On a month-on-month basis, PPI rose by 0.4 percent, in line with analysts’ expectations published by MarketWatch.
Energy costs jumped by 4.2 percent over the month, notably boosted by the cost of diesel fuel, which surged 24.1 percent, the Labor Department report said. The costs of regular gasoline and diesel in the United States have risen since US-Israeli strikes targeting Iran in late February prompted Tehran to choke off the Strait of Hormuz in retaliation. The waterway is a crucial route for global energy transit.
The price of diesel, the fuel needed for road hauling and agriculture, has rocketed to a new record in the United States this week. It now stands at a national average of $5.98 per gallon, significantly up from the year-ago average of $3.71 per gallon, according to the AAA motorists’ association. While Trump has vowed that oil prices would cool as soon as the United States wins the war, the conflict has hit an impasse more than six months after it started. The US leader is under pressure to end fighting as the November midterm elections approach, with his supporters—including farmers—growing increasingly frustrated. Steeper costs for the diesel used to fuel farm equipment has added to expenses over the fall harvest season.
On Thursday, government data showed that costs for gasoline, jet fuel, home heating oil, alongside candy and nuts, also rose.
– ‘Close call’ –
Also Thursday, the yield on the 30-year Treasury bond climbed to 5.35 percent, hitting its highest level since 2007. All eyes are now turning to the Consumer Price Index, a key gauge of consumer inflation due to be released Friday, for the overall bearing these figures may have on US interest rates. The Federal Reserve’s rate-setting committee is due to meet next week and high inflation could push policymakers towards raising rates. Already, the CMEGroup’s FedWatch tool puts the likelihood of a 25 basis points rate hike at nearly 70 percent for next week’s meeting.
“It is likely to be a close call on whether the FOMC decides to raise rates next week,” said Nationwide senior economist Ben Ayers, referring to the Federal Open Market Committee. “Headline producer prices were pushed higher predominantly by the jump in diesel fuel costs over August,” Ayers said. “But the Iran war and resulting supply chain disruptions also continue to add pressure to goods costs beyond energy and food,” he added in a note.
© 2024 AFP
