Customers shop at a Costco wholesale store in Miami on December 15, 2023.
Joe Raedle | Getty Images News | Getty Images
Wholesale prices rose more than expected in January, according to a U.S. Labor Department report Friday, further complicating the inflation picture.
The producer price index, a measure of the prices received by producers of domestic goods and services, rose 0.3% for the month, the strongest increase since August. Economists surveyed by Dow Jones had expected an increase of just 0.1%. The PPI fell 0.2% in December.
Excluding food and energy, core PPI rose 0.5%, also against expectations for a 0.1% rise. PPI excluding food, energy and trade services rose 0.6%, the biggest one-month increase since January 2023.
The report comes just days after the consumer price index showed inflation remains stubbornly higher despite the Federal Reserve’s expectations that it will moderate over the course of the year. The CPI rose 3.1% from a year ago, below its December level but still well above the Fed’s inflation target of 2%.
On a core basis, which the Fed tends to focus on as a longer-term indicator of inflation, the CPI rose 3.9%. The CPI differs from the PPI in that it measures the prices consumers actually pay in the market.
Markets fell sharply following the release of the consumer price index on Tuesday and there were fears that the high producer price index numbers could also trigger another shock. Expectations are growing that the Fed would use easing inflation numbers as incentive to aggressively cut interest rates this year, but traders have had to scale back those expectations in recent days as inflation has been unexpectedly persistent.
Stock market futures fell after the PPI report and Treasury yields rose.
Just a few weeks ago, the markets had priced in the Fed’s first interest rate cut in March. That has since been reduced to June as policymakers expressed caution not to give up the fight against inflation too quickly, while noting that an otherwise stable economy is buying them time before they have to move.
A 0.6% increase in final demand services helped lift the wholesale index, helped in turn by a 2.2% increase in outpatient hospital care. Goods prices actually fell 0.2% as final demand for energy fell 1.7% while gasoline fell 3.6%.
On a 12-month basis, overall PPI rose just 0.9%, slightly less than December’s 1%. However, excluding food, energy and trading services, the index rose 2.6%.
Adding to the worrisome inflation numbers, the Commerce Department reported this week that retail sales fell 0.8% in January, far more than expected.
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2024-02-16 14:53:03
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