Low gas prices fought off inflation this summer

A steady producer-price index helped keep inflation at bay over the summer, and it was largely thanks to cheap gasoline.

U.S. business prices remained flat in the month of August, signaling a low rate of inflation over the course of the summer. According to a report from the Wall Street Journal, the producer-price index, a gauge of the prices companies pay for goods and services, didn’t increase at all in August, after a 0.2 percent bump in July.

Analysts believe that much of the reason for the flat producer-price index was due to the volatile price of oil and gas. When excluding food and energy costs from the index, the price of goods for producers actually climbed 0.3 percent in august.

According to Millan Mulraine, an economist from TD Securities, “As the dampening impact from the strong dollar and falling energy prices continues to make its way through the price pipeline, we expect both producer and consumer price inflation to remain subdued.” He added that this effect would likely cause confusion in the Federal Reserve as they prepare their outlook on inflation.

The index gauges the prices from the seller’s point of view, but is useful for tracking other measures of inflation that consumers can use. Typically, when the dollar is strong and oil prices are low, inflation remains flat.

Other producer price hikes were attributed to volatile margins for apparel, footwear, and accessories retailers. The falling dollar hit these sectors the hardest, and they will likely recover at a slower rate.

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