U.S. Inflation Outlook Stays Favorable Amid Mixed Producer Price Data

U.S. producer prices were flat in September due to cheaper goods offsetting expensive services, supporting the possibility of a Federal Reserve rate cut. Despite a slight increase in consumer prices and mixed service cost data, inflation expectations remain stable, crucial as an electoral issue.

U.S. producer prices remained unchanged in September as declining goods costs balanced the rise in service expenses, heralding a potentially favorable inflation outlook. This development aligns with expectations for the Federal Reserve's possible rate reduction next month. The Labor Department reported these figures on Friday, coinciding with slightly higher consumer prices than anticipated.

Paul Ashworth, the chief North America economist at Capital Economics, predicts a 25 basis point rate cut, expecting inflation to moderate to target levels by early next year. The producer price index for final demand stood unchanged after a minor gain in August, reinforcing economists' forecasts for stable inflation trends.

Consumer sentiment has dipped, with inflation concerns impacting voter perspectives ahead of the presidential election. Mixed producer price data indicated varied trends across different sectors, with notable increases in food prices countered by declines in energy and goods pricing. Consequently, the financial landscape remains under scrutiny amid broader economic implications.

(With inputs from agencies.)