The Producer Price Index fell by 0.1% in August, according to new data released Wednesday, fueling the push for an interest rate drop. CBS News MoneyWatch correspondent Kelly O'Grady breaks it down.

Washington

The producer price index (PPI) has registered a 0.1% decrease, indicating a rare drop in the cost of goods at the production level. On an annual basis, inflation came in at 2.6%, down from the expected 3.3%, though it remains above the Federal Reserve's 2% target. The report shows that different industries are affected in varying ways, with automakers and energy sectors seeing reduced profit margins, suggesting they are absorbing some costs rather than passing them on to consumers.

The data has intensified discussions about the possibility of an interest rate cut by the Federal Reserve, with some investors suggesting the new figures support a larger rate reduction. The president publicly called for immediate action from the Fed, while the upcoming consumer price index report is expected to provide further insight into inflation trends. Market reactions have been relatively flat following the release of the data.

Producer price inflation report shows slight dip

New data out this morning offering more insight to the toll that inflation is taking on your wallet. A little over an hour ago, we learned the producer price index actually fell by 0.1%. It follows that dramatic revision to recent hiring numbers that we shared with you yesterday morning. Together, they are fueling a growing sense that an interest rate cut from the Fed may be inevitable. So joining me now to talk about it, CBS News Money Watch correspondent Kelly O'Grady. What's up? Hey there. All right. So tell us a little bit about this PPI report and what does it signal about the upcoming CPI report? Yes. Okay. So we're going to get that CPI report. That's consumer prices for rather for prices for consumers. That's out tomorrow. What stood out to me here was the overall inflation number when it comes to an annual perspective. You just mentioned the monthly number fell by 0.1%. So what that means is producer prices, what it costs to produce the goods that you and I buy actually fell. It was very rare that you see that. But the annual number, we were expecting 3.3%. It came down to 2.6%. So still a very big improvement. But it does mean that we are above that 2% that the Fed is looking for. So that's the first thing that stuck out to me. The second thing is we parsed through this. And what we are trying to answer is where are the tariffs going? Who is eating them? Is it consumers? Is it the foreign sellers of these goods? Is it businesses? And when I was parsing through the report, it's really different for different industries. Machinery and vehicle wholesaling, so think your automakers, their margins actually dropped in this report. So what that means is they are eating those costs because they're making less profit. Then you also look at energy. That also dropped. So that's sort of offsetting some of these overall numbers. And that's what I really want to underscore. You hear this headline number, and the president celebrated it today. He said, Powell, you got a cut. He was on True Social. But one overall headline number is very, very hard. It's just made up of so many different industries that are reacting in different ways. And here's that True Social post by the president. No inflation. Too late. Too late. Is that Powell? That's too late. Yeah. That's his nickname for Powell. Must lower the rate right now. He's a total disaster who doesn't have a clue. President DJT. So I noticed that Apple came out with a new iPhone, and the reason I bring that up is because the prices are pretty much where they were the last time Apple released a new product. Is that because the tariffs have not yet been factored into the prices of electronics like iPhones, or is it because they have inventory? Like I'm trying to understand. Presumably, this is a new phone, so the inventory is brand new. So smartphones are exempt. Smartphones are exempt from tariffs. Yes. Yes. So they're not there. And of course, Apple has also made promises to manufacture more of these things in the U.S. Okay. And so there's sort of an element of, hey, we're investing. I know. Interesting. Interesting. But I do want to highlight, you know, we just talked about the president's push for Powell to lower rates. I talked to a number of investors this morning when this data came out, and I was like, hey, the jobs numbers are tough, right? We're weakening here. You have inflation that was lower. And every single one said to me, you know what? If the Fed really is just data dependent and they're only looking at this data, this makes the case for a half point rate cut. As opposed to a quarter point. As opposed to a quarter point. Wow. Okay. So there's going to be a lot of pressure on them next week. And when is that meeting? Next week? That is next Wednesday. Next Wednesday. But you did mention the Consumer Price Index. That's out tomorrow. Tomorrow. That's going to be another data point. So that'll be another data point. Right. And then depending on how that looks, we'll have even a little bit more insight into what happens next week. That's exactly right. All right. How's the market doing? Let's see. Let's throw that up real quick to see. All right. So you're factoring in all this already? It's kind of just flat. Yeah. Just like sort of gyrating there at the flat level there. Okay. All right. We'll be watching. Kelly, thank you very much.

Conservative political activist Charlie Kirk was shot during a speaking event at Utah Valley University in Orem, Utah on Wednesday. 
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Orem

Conservative political activist Charlie Kirk shot

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Warsaw

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