Producer prices were unchanged in August, as rising energy costs were offset by falling prices for food, trucks and computers, the government said Friday in a report showing the Federal Reserve has little to fear from inflation.
The Labor Department said its producer price index, a closely watched gauge of inflation at the wholesale level, was flat in August, undershooting analyst expectations for a 0.2 percent rise. That compared to a 0.2 percent decline in July.
The core rate, which excludes volatile food and energy prices, fell 0.1 percent, confounding analyst forecasts for a 0.1 percent climb. The core was down 0.3 percent the previous month.
"Basically good news on the inflation front," said Tony Maramarco, a portfolio manager with Boston-based David L. Babson & Co, which oversees $79 billion in assets.
"Nothing is getting away from us, and though some people may be concerned about deflation, that is not a major concern based on this number."
The report should help soothe any deflation worries as it showed evidence of some price pressures coming down the pipeline.
Prices of intermediate goods climbed 0.4 percent, with the core also rising by the same amount. Crude goods costs were up 1.6 percent and excluding the food and energy categories, prices were up 0.4 percent.
The Fed is next due to to discuss interest rates on Sept. 24 and is widely expected to keep rates on hold at that meeting.
In the overall number, energy prices climbed 1 percent, pushed up by a 3.7 percent rise in gasoline costs which showed the largest increase since April.
Oil prices recently hit an 18-month high of more than $30 per barrel on fears the United States might strike Iraq. However, on Thursday, Fed Chairman Alan Greenspan said he did not expect high oil prices to have a heavy impact on the economy at this stage.
In the Labor report, higher energy costs were outweighed by volatile food prices which dropped 0.4 percent in August -- after a 0.1 percent fall the prior month -- pulled down by falling prices of vegetables and meat.
A 3.8 percent decline in prices for electronic computers helped pull down core prices, as did a 1.3 percent drop in the cost of light motor trucks.
Passenger car prices fell 0.1 percent after sliding 1.5 percent in July.