Weak gasoline, food prices dampen U.S. producer inflation

[September 16, 2014]  WASHINGTON (Reuters) - U.S. producer prices were flat in August, pointing to muted inflation pressures that should see the Federal Reserve in no hurry to raise interest rates.

The Labor Department said on Tuesday its producer price index for final demand was unchanged as gasoline and food costs fell.

Producer prices had edged up 0.1 percent in July. Economists had expected a 0.1 percent increase last month.

In the 12 months through August, producer prices increased 1.8 percent after rising 1.7 percent in July.

The report came as Fed officials were due to start a two-day policy meeting. Data on retail sales, manufacturing, the services sector and housing have suggested the economy is on a sustainable growth path.

The tame producer prices report, however, implies the U.S. central bank could bid its time before lifting its benchmark overnight lending rate from near zero, where it has been since December 2008.

Last month, prices at the factory gate were held back by a 1.4 percent decline in gasoline prices, which followed a 2.1 percent fall in July.

Food prices slipped 0.5 percent after rising 0.4 percent in July.

Prices received for services at the final demand level increased 0.3 percent after nudging up 0.1 percent in July.

Producer prices excluding food and energy ticked up 0.1 percent, slowing from a 0.2 percent gain in July. In the 12 months through August, the core PPI for final demand advanced 1.8 percent. It had increased 1.6 percent in July.

A broader measure, which excludes food, energy and trade services, increased 0.2 percent after increasing by the same margin in July.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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