U.S. traders got a pair of upbeat economic reports today, with data showing modest increases in producer prices along with a narrowing trade deficit.

The U.S. Labor Department announced early Friday that producer prices rose by 0.3% in September, after rising by 0.4% in August. Excluding usually volatile food and energy costs, core prices saw their pace of growth unchanged from August’s 0.1% rise.

The numbers validated the Federal Reserve’s view that the faster economic growth expected over the next year and a half isn’t likely to fan inflation.

“There is some pressure in the pipeline, but not much,” says BMO Nesbitt Burns “Core intermediate materials prices were up only 0.1% last month and 1.7% on the year. Core crude goods prices rose 2.3% in September and 11.1% for the last twelve months. We will be watching these measures closely since the weakening U.S. dollar likely will lead to pressure on these prices first.”

Softness in the core came on price declines for vehicles and capital equipment, and core prices at the intermediate level were also soft,” comments CIBC World Markets. “Thus far, at least, a weaker US dollar, and its impact on import prices, is not providing an umbrella under which American manufacturers can raise their prices.”

“Inflation in the U.S. remains virtually non-existent, as does corporate pricing power,” Nesbitt notes. “This report will not change the Fed’s view on the inflation outlook — they will keep rates low for still some months to come.”

In a separate release, the U.S. Commerce Department reported the U.S. trade deficit narrowed for a fifth straight month in August, falling to US$39.21 billion, from a revised US$40.03 billion in July.

“Exports fell US$2.3 billion while imports were off US$3.1 billion. In percentage terms, exports fell 2.7% from the previous month on a seasonally-adjusted basis, and are up 1.4% over the year. Imports fell 2.5% during the month, and are up 3.4% over the year,” says RBC Financial.

“It is likely that the August blackout in parts of the Midwest and Northeast and its disruptive impact on manufacturing could be partly to blame for the weak trade flows during the month,” RBC says.

“This report supports forecasts of robust growth projections for Q3, as trade was less of a drag on growth during the quarter. The recent trend toward a narrower trade gap is encouraging, but there is still a long way to go to restore some semblance of balance to global trade,” says Nesbitt.