US inflation at the wholesale level accelerated last month, as the war with Iran pushed up energy prices. The Producer Price Index, which tracks price changes received by US producers and manufacturers, increased 5.4% in the 12 months that ended in August.
Wholesale price pressures re-accelerated in Aug-26, with the headline Producer Price Index (PPI) inflation increasing to +5.4%yoy (Jul-26: +4.8%yoy), slightly surpassing market expectations of +5.3%yoy. Meanwhile, core PPI, inched up to +4.6%yoy in Aug-26 (Jul-26: +4.3%yoy), matching market estimates.
On month-on-month basis, producer prices rose by +0.4%mom, in line with the market consensus and marking the largest monthly increase in 3 months. This uptake was driven by a +1.1%mom surge in goods prices, which rebounded after 2 consecutive months of decline. The increase was heavily fueled by a +24.1%mom jump in diesel fuel alongside gains in gasoline, jet fuel, heating oil, tobacco, and confectionery, which offset a -0.5%mom decline in residential electric power costs. Meanwhile, services costs edged up by a modest +0.1%mom, supported by higher prices in freight truck transportation (+2.0%mom), airline passenger services, legal services, inpatient hospital care, and auto retailing. Meanwhile, core PPI rose +0.2%mom, matching consensus estimates.
In a separate release, initial unemployment claims edged down by -1K to 206K for the week ending 4th September 2026, in line with market expectations (205K) and reinforcing a trend of historically low layoff counts since hitting a near 60-year low of 189K in mid-Jul-26.
MBSB highlighted that the higher producer inflation and still-low jobless claims strengthen the case for further Fed tightening, as inflation remains elevated while the labour market shows limited signs of deterioration. Markets continue to price in a +25bps hike at the Sep-26 FOMC meeting, with probability rising to around 71.8%, according to CME FedWatch.
