With energy prices showing a substantial rebound in the month of August, the Labor Department released a report on Thursday showing that U.S. producer prices rose by more than expected during the month.
The Labor Department said its producer price index surged up by 1.7 percent in August following a 0.3 percent increase in July. Economists had expected the index to increase by 1.4 percent.
The increase in producer prices in August reflected the largest monthly rise since a 1.9 percent increase in June of 2009.
Contributing to the increase in producer prices, energy prices soared by 6.4 percent in August after edging down by 0.4 percent in July.
The sharp jump in energy prices, which reflected the biggest increase since August of 2009, came on the heels of five consecutive monthly decreases. A 13.6 percent jump in gasoline prices accounted for much of the increase in energy prices.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "With crude oil prices continuing to rise over the past couple of weeks, we can expect a further increase in gasoline prices in September too."
The report also showed that food prices increased by 0.9 percent in August, reflecting the biggest increase since November of 2011. The increase was largely due to a 3.0 percent jump in prices for dairy products.
Excluding the increases in food and energy prices, the core producer price index edged up by 0.2 percent in August after rising by 0.4 percent in July. The modest increase in core prices came in line with economist estimates.
The Labor Department said over thirty percent of the increase in core prices can be traced to a 0.5 percent advance in prices for pharmaceutical preparations.
Compared to the same month a year ago, producer prices surged up by 2.0 percent in August, reflecting a notable acceleration from the 0.5 percent year-over-year growth seen in July. Core prices increased at an annual rate of 2.5 percent.
"PPI will probably climb higher over the next few months, but eventually we expect energy and agricultural commodity prices to drop back, which should cause PPI to fall back in 2013 as well," Ashworth said.
Friday morning, the Labor Department is scheduled to release a separate report on consumer price inflation in the month of August.
Economists expect consumer prices to increase by about 0.6 percent in August after coming in roughly flat in July. Core consumer prices are expected to edge up by 0.2 percent.
Jim O'Sullivan, Chief U.S. Economist at High Frequency Economics, said, "Tomorrow's CPI will likely show a similar pattern, with a gasoline-led surge in the total but a fairly tame core reading."
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