Interior view of a Costco store on August 18, 2020 in Teterboro, New Jersey. On Thursday, Costco Wholesale (COST) stock hit the 90-plus percentile, improving to 93, up from 89 the previous day.

Kena Betancur | Corbis news | Getty Images

Wholesale inflation rose more than expected in August, contradicting recent data showing that price increases have eased recently.

The producer price index, a measure of what producers receive for their goods and services, rose a seasonally adjusted 0.7% in August and a 1.6% year-over-year increase, the U.S. Labor Department reported. This monthly increase was above the Dow Jones estimate of 0.4% and was the largest single-month increase since June 2022.

However, excluding food and energy, the producer price index increased by 0.2%, in line with the estimate. On a 12-month basis, core PPI rose 2.1%, the lowest annual reading since January 2021. Excluding food, energy and trade services, PPI rose 0.3%.

The data comes a day after the more closely tracked consumer price index rose 0.6% month-on-month and 3.7% year-on-year. Excluding food and energy, core CPI rose 0.3% and 4.3%, respectively.

As with the CPI, much of the upward pressure on the PPI came from a sharp rise in energy prices. The PPI energy index rose 10.5% month-on-month, driven by a 20% rise in gasoline prices.

Prices of final demand goods rose 2% in August, the largest monthly increase since June 2022. Prices of services rose 0.2%.

In other economic news, the Commerce Department estimated Thursday that retail sales rose a stronger-than-expected 0.6% in August, well above the Dow Jones estimate of 0.1%. Excluding cars, sales also rose 0.6% versus the 0.4% estimate.

These numbers are not adjusted for inflation, suggesting that consumers are still holding out despite rising prices and increasing credit card debt. Compared to the monthly increase in CPI, real retail sales remained flat month-on-month. Sales rose 2.5% year over year, below the annual CPI inflation rate of 3.7%.

The retail report also reflected higher energy prices as gas station sales rose 5.2%.

The so-called control group of retail sales, which excludes, for example, gas stations, restaurants, car sales as well as building materials and garden stores and is included in the calculation of gross domestic product, only rose by 0.1% in August.

Markets took both reports calmly, with futures tied to the Dow Jones Industrial Average up about 80 points at the start. Yields on government bonds were slightly higher across the board.

The PPI focuses on domestic prices and generally represents the cost of producing goods and services. In contrast, the CPI measures what consumers pay in the market and takes import prices into account.

Both indicators show that while inflation remains a problem for U.S. households, the rate of increase appears to have generally slowed in recent months. This was an important consideration for the Federal Reserve as it charts its future course following a series of 11 interest rate hikes totaling 5.25 percentage points.

Market prices indicate that it is almost certain that the Fed will not raise interest rates next week. Although central bank officials indicated in June that they expected another rate hike before the end of the year, market futures on Thursday morning suggested a 42 percent chance of a rate hike in November, according to data from CME Group.

A third economic report on Thursday showed that initial jobless claims rose to 220,000 in the week ended Sept. 9, according to the Labor Department. However, that was slightly below the Dow Jones estimate of 225,000.

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