Key inflation indicators rose sharply in February, confirming that the pace of inflation is accelerating as the new year begins.
The producer price index, which measures the prices U.S. businesses pay for goods and services, rose 0.6% in the second month of 2024, the Labor Department said Thursday.
This was twice the producer price index (PPI) inflation rate recorded in January and double what Wall Street expected.
Compared to a year ago, the index rose 1.6%, sharply accelerating from the 12th straight month of 0.9% gains recorded in January. Economists had expected a 1.2% increase.
This was the highest monthly rate of increase since August last year, and the highest annual rate of increase since September. The producer price index has increased in three of the past four months.
Consumer price index and PPI data for January and February suggest that the slowdown in inflation seen last year has stopped. This calls into question the timing and extent of any interest rate cuts the Federal Reserve may make this year.
Core PPI, which excludes food and energy prices, rose 0.3% in the month. That was down from January’s 0.5%, but above the consensus estimate of 0.2%. Compared to a year ago, core PPI is up 2%, exactly in line with the 12-month increase recorded in January.
And excluding a category called trade services, which measures price gains for retailers and wholesalers, prices rose 0.4% in February, slowing from a 0.6% monthly rise at the start of the year. Over the past 12 months, this so-called core-core PPI index has risen by 2.8 percent, up from 2.6 percent in January.
If producer price inflation increases over the next 12 months as it did in February, prices would rise by 6.9%.
of producer price This measurement’s name derives in part from the fact that price changes are measured from the perspective of the seller of the product rather than the buyer. That is, it does not include sales or excise taxes or government subsidies paid to consumers. Shipping charges paid by the consumer are also excluded. The value of imported goods is not included because they are received by foreign producers rather than U.S. producers.
of final demand The name of this measurement derives in part from the fact that what is measured is the so-called “selling price.” user. That is, it is not a sale of components or materials used directly to create goods or services sold to consumers. These are products sold to customers who are government buyers, residential buyers, businesses purchasing capital goods, and foreign buyers.
Earlier this week, the Department of Labor reported that the consumer price index for February rose 0.4% from the previous month. This is an increase of 3.2% compared to 12 months ago. The core index, which excludes food and energy prices, also rose 0.4%, for a 12-month increase of 3.8%. Monthly and annual increases in core CPI exceeded expectations.
Final demand goods prices rose 1.2% in February, the largest increase since August. The index for core goods excluding food and energy rose 0.3%, but a large rise in energy prices explained most of the increase. Final demand food prices rose by 1%.
Prices for final demand services rose 0.3% in February after rising 0.5% in January.
In addition to the final demand goods and services index, the government calculates the following indexes: intermediate demand product. These are goods and services purchased by businesses as inputs to production, excluding capital investment. Intermediate goods include wood used to build homes, hardware that is assembled into computers, and wheat that is later processed into food.
Processed goods for intermediate production rose 1.6% in February, the largest increase since August. Food and feed rose by 0.3% and fuel by 6.2%.
Core intermediate goods rose 0.5%, the third straight month of gains, accelerating from 0.3% in January and 0.1% in December. Compared to a year ago, processed goods for intermediate demand fell by 1.8%, less than half the 12-month decline of 3.7% recorded in January.
The intermediate demand raw goods index rose 1.2%. This was due to a sharp rise in energy prices and a slight increase in food and feed prices. Excluding these categories, raw product prices declined.
The producer price index is often referred to as the “wholesale price index,” but this is incorrect. This is not a wholesale price index and specifically does not reflect the prices of items sold wholesale rather than retail. It was known as the Wholesale Price Index until it was changed more than 45 years ago, but that name has always been inaccurate.
