U.S. producer prices edged down in August, marking the first decline in four months, according to the latest government data.

The Bureau of Labor Statistics released its monthly Producer Price Index report on Sept. 10, showing that final demand fell 0.1% month-over-month during August, following a downwardly revised 0.7% rise in July and well below forecasts of a 0.3% increase estimated by Dow Jones.

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The decrease is attributed to a 0.2% fall in the cost of services, the largest drop since April led by a 3.9% decline in margins for machinery and vehicle wholesaling.

On an annual basis, producer prices rose 2.6%, below a downwardly revised 3.1% rate in July and forecasts of 3.3%.

U.S. Producer Price Index Month-Over-Month

source: tradingeconomics.com 

U.S. Producer Price Index Year-Over-Year

source: tradingeconomics.com 

The PPI tracks average price shifts at the wholesale level before they reach customers.

Core producer prices — which excludes volatile food and energy categories — also declined 0.1%, below forecasts of a 0.3% rise and the annual core rate fell more than expected to 2.8%.

The producer price reports comes a week ahead of when the Federal Reserve is expected to make a decision on an interest rate cut.

“Futures market pricing implies a 100% probability that the committee will approve its first rate cut since December 2024, though the PPI release and a consumer price reading Thursday are being watched closely for indications of whether policymakers will follow through. Odds for a larger half percentage point reduction increased slightly after the PPI release to about 10%, according to the CME Group’s FedWatch gauge,” CNBC reported.