US producer price index – September 2019:

Line workers begin installing the interior and electronics on the flex line at Nissan Motor Co’s automobile manufacturing plant in Smyrna, Tennessee, August 23, 2018.William DeShazer | ReutersU.S. producer prices unexpectedly fell in September, weighed down by decreases in the costs of goods and services, which could give the Federal Reserve room to cut interest rates again this month to limit the drag on the economy from trade tensions and slowing growth overseas.The Labor Department said on Tuesday its producer price index for final demand dropped 0.3% last month, the largest decline since January, after edging up 0.1% in August.In the 12 months through September the PPI increased 1.4%, the smallest increase since November 2016, after rising 1.8% in August. Economists polled by Reuters had forecast the PPI nudging up 0.1% in September and advancing 1.8% on a year-on-year basis.Excluding the volatile food, energy and trade services components, producer prices were unchanged last month after jumping 0.4% in August. The so-called core PPI increased 1.7% in the 12 months through September after climbing 1.9% in August.The Fed, which has a 2% annual inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy. The core PCE price index rose 1.8% on a year-on-year basis in August and has undershot its target this year.Some economists expect the U.S. central bank could cut rates at its Oct. 29-30 policy meeting amid signs that the Trump administration’s 15-month trade war with China, which has weighed on business investment and pushed manufacturing into recession, was impacting the broader economy.

While the unemployment rate dropped to near a 50-year low of 3.5% in September, hiring slowed significantly, with the three-month average gain in private payrolls falling to 119,000 jobs, the smallest since July 2012, from 135,000 in August.In addition, private services industry growth slowed to a three-year low in September.The Fed cut rates last month after reducing borrowing costs in July for the first time since 2008, to keep the longest economic expansion on record, now in its 11th year, on track.In September, wholesale energy prices fell 2.5%, matching August’s decline. They were pulled down by a 7.2% decline in gasoline prices, which followed a 6.6% percent drop in August.Gasoline accounted for three quarters of the 0.4% drop in goods prices last month. Goods prices decreased 0.5% in August. Wholesale food prices rose 0.3% in September after dropping 0.6% in the prior month. Core goods prices fell 0.1% last month. They were unchanged in August.The cost of services fell 0.2%, the most since February 2017, after increasing 0.3% in August. Services were weighed down by a 1.0% drop in trade services, which measure changes in margins received by wholesalers and retailers. Nearly half of the drop in services was attributed to 2.7% decrease machinery and vehicle wholesaling.The cost of healthcare services rose 0.3% after rising 0.2% in August. The cost of hospital outpatient care surged 1.1%, the biggest gain since 2014. Those healthcare costs feed into the core PCE price index.

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