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U.S. producer inflation, labor market strengthening

U.S. producer inflation, labor market strengthening
From Reuters - October 12, 2017

WASHINGTON (Reuters) - U.S. producer prices rose in September as the price of gasoline recorded its biggest gain in more than two years amid hurricane-related production disruptions at oil refineries in Texas.

Other data on Thursday showed applications for unemployment benefits dropped to a more than one-month low last week as the boost to claims in Texas and Florida from Hurricanes Harvey and Irma continued to unwind.

While the storms impacted the data, there were signs of underlying strength in both wholesale inflation and the labor market, potentially leaving the Federal Reserve on track to raise interest rates again in December.

The strength of the inflation and labor market indicators reported today provide important support to our December interest rate hike call, said Scott Anderson, chief economist at Bank of the West in San Francisco.

The Labor Department said its producer price index for final demand rose 0.4 percent also lifted by an increase in the cost of services. Wholesale prices advanced 0.2 percent in August.

In the 12 months through September, the PPI jumped 2.6 percent. That was the biggest gain since February 2012 and followed a 2.4 percent increase in August.

Wholesale gasoline prices soared 10.9 percent in September after increasing 9.5 percent in August. The increase was the largest since May 2015 and accounted for two-thirds of the 0.7 percent rise in the price of goods.

The Labor Department said higher energy prices were likely the result of reduced refining capacity in the Gulf Coast area due to Hurricane Harvey. Last months hurricane-driven surge in gasoline prices, however, is likely to be temporary amid ample crude oil supplies.

The dollar .DXY rose marginally against a basket of currencies as investors awaited Septembers consumer inflation report on Friday. Prices of U.S. Treasuries rose slightly while stocks on Wall Street were little changed after results from JPMorgan (JPM.N) and Citigroup (C.N) failed to fuel the optimism that had driven indexes to record highs.

CORE INFLATION FIRMING

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent last month after a similar gain in August. The so-called core PPI increased 2.1 percent in the 12 months through September after climbing 1.9 percent in August.

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