US Producer Prices Surge 1.4% in January, Annual Wholesale Inflation Rises to 4.6%

Producer prices in the U.S. jumped more than expected in January and annual wholesale inflation climbed the most since October 2008, the government reported on Thursday.

The Labor Department’s Producer Price Index (PPI), which measures inflation pressures before they reach the consumer, soared 1.4% in January after a 0.4% increase in December. Forecasts for the month ranged from 0.7% to 0.9%.

Driving prices higher were increased energy and good costs, with respective gains of 5.1% and 1.7%. The same readings in December came in at 0.7% and 0.6%. The biggest contributors to wholesale energy prices were a 11.5% advance in gasoline and 16.2% rise in home heating oil — the latter helped by colder than normal weather. Food prices were up 0.4% compared to 1.3% in December.

The core PPI, which excludes volatile food and energy prices, advanced 0.3% in January after coming in flat for December. Most economists were citing an expected increase of 0.1%. The core number suggests that the Federal Reserve will feel little pressure to increase interest rates based on the PPI.

"While pipeline pressures appear to be mounting, we do not expect them to pass through to finished goods due to high levels of spare capacity," wrote Anika Khan, an economist for Wells Fargo Securities. "As such, the Fed will continue to have the flexibility to keep short-term interest rates low."

Compared with a year earlier, producer prices rose 4.6% — the biggest increase since the start of the recession when the annual level reported in October 2008 was pegged at 5.2%. Annual core producer prices rose 1%. It was unchanged in December.

The government’s Consumer Price Index (CPI) for January is scheduled to be released on Friday at 8:30 AM ET. The CPI measures inflation pressures at the consumer level. Common forecasts are for a 0.3% increase for the month and a core of 0.1%

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