Core PPI Unchanged, Trade Deficit Improves

The Producer Price Index for August rose .6% versus estimates of a .7% gain and a 1.0% increase in July.
- The PPI Ex Food & Energy for August was unchanged versus estimates of a .1% increase and a .4% gain in July.
- The Trade Deficit for July shrank to -$57.9B versus estimates of -$59.8B and -$59.5B in June.

BOTTOM LINE: US producer prices rose less than forecast in August, suggesting limited signs of accelerating inflation before Hurricane Katrina sent crude oil to a record high and pushed up costs of other raw materials, Bloomberg said. The price of gasoline rose 9.5% last month. However, unleaded gasoline futures have declined around 35% over the last week. Moreover, passenger car prices fell 1.3 percent, food prices fell .3 percent, capital equipment prices declined .1 percent and computer prices declined .4% during August. This is a very positive number, however next month’s reading will likely show acceleration.
The US Trade Deficit unexpectedly narrowed to $57.9 billion in July as exports rose to a record and demand for imported pharmaceuticals, clothing and aircraft fell amid soaring energy prices, Bloomberg reported. Exports climbed .4%, while imports fell .7 percent in July. I would expect the deficit to widen in August to account for the increase in commodity prices during the month.