Producer Price Index Rises 0.4% in August, Driven by Energy Costs
By TopHolding Editorial · Wednesday, September 9, 2026 at 8:00 PM
The Producer Price Index (PPI) increased by 0.4% in August, aligning with consensus expectations, according to economists at First Trust Portfolios. The overall rise was significantly influenced by a 4.2% jump in energy prices, contributing to a 5.4% year-over-year increase in producer prices. The report highlights that excluding food and energy, producer prices saw a more moderate 0.2% rise for the month, though the annual "core" rate significantly outpaced the prior year's figure.
According to Brian S. Wesbury, Chief Economist, Robert Stein, Deputy Chief Economist, and Braden Spiech, Economic Analyst at First Trust Portfolios, the Producer Price Index (PPI) rose 0.4% in August, matching consensus expectations. This pushed producer prices up 5.4% compared to a year ago. The economists note that over half of this headline increase was due to a substantial 4.2% rise in energy prices for the month.
First Trust's analysis indicates that excluding food and energy, producer prices increased by a more modest 0.2% in August. On an annual basis, prices excluding food and energy climbed 4.6%. The report details that prices for goods saw a 1.1% increase in August, while services prices rose 0.1%. More than a third of the increase in goods prices was attributed to a 24.1% surge in diesel prices, which First Trust connects to renewed oil price increases amidst ongoing Middle East hostilities. Services prices were primarily led by a 2.0% increase in truck freight transportation costs.
Further back in the supply chain, prices for intermediate processed goods advanced 1.8% in August, with intermediate unprocessed goods up 1.1%. Wesbury, Stein, and Spiech observe that while energy drove the rise in processed intermediate goods, almost 60% of the increase in unprocessed intermediate goods stemmed from nonfood materials excluding energy, such as metal scrap and construction materials. They highlight that the twelve-month change for "core" producer prices, at 4.6%, is well above the 2.9% increase recorded for the twelve months ending in August 2025.
The economists at First Trust believe the August price pickup will likely increase pressure on the Federal Reserve to raise interest rates at its upcoming meeting. They note that futures markets imply about a 70% chance of a hike. However, they suggest policymakers should focus more on the money supply, which has increased 5.4% over the past year, compared to the 6.0% trend before COVID-19 when inflation was low. First Trust's team anticipates this "monetary tightness will eventually bring inflation down once the conflict in the Middle East ends."
Key terms
1. Producer Price Index (PPI): A measure of the average change over time in the selling prices received by domestic producers for their output.
2. Core producer prices: Producer Price Index data that excludes volatile food and energy prices, often used as a better indicator of underlying inflation trends.
3. Intermediate goods: Products that have been partially processed but require further processing before they can be sold to the final consumer.
Source: Braden Spiech, Economic Analyst; Brian S. Wesbury, Chief Economist; Robert Stein, CFA, Dep. Chief Economist, First Trust Portfolios — Data Watch. Read the original at ftportfolios.com.