A key inflation measure jumped in January, confirming earlier data showing prices for U.S. goods and services rose at a faster pace as the new year began.
The final demand producer price index, a broad measure of the prices paid for goods and services produced by U.S. businesses, rose 0.3% from a month earlier, the Labor Department said Friday.
Wall Street had expected a small increase of just 0.1%. The index fell 0.1% in December after rising just 0.1% in November.
January’s sharp rise pushed the index to its fastest pace since August 2023.
The biggest factor in the increase was service prices. The service index increased by 0.6% from the previous month, the largest increase since July 2023.
Core producer prices (excluding food, energy, trade and services indicators showing retail and wholesale margins) rose 0.6%, the largest increase since January 2023.
Commodity prices continued to fall in January, falling by 0.2% for the month.
The producer price index is a measure of the prices of goods and services received by domestic producers for personal consumption, capital investment, government use, and export.
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.
The PPI report showed the consumer price index rose by a better-than-expected 0.3%, confirming the spike in inflation shown earlier this week. Core CPI, which excludes food and energy prices, rose 0.4%. This week the government also reported that import prices, a leading indicator of domestic inflation, fell more modestly than expected, rising 0.8%.
The producer price index fell three times on a monthly basis last year, indicating a decline in prices. However, each time it returned to positive territory. Inflationary pressures that started in the goods sector of the economy have shifted to services due to a surge in consumer purchases and supply chain constraints.
Compared to a year ago, the producer price index increased by 0.9%. Meanwhile, core prices rose 2.6%.
A stronger-than-expected rise in the CPI sent Wall Street scrambling this week to reassess expectations for Fed rate cuts. Major stock indexes sold off on Tuesday, bond prices also fell and yields rose. The probability of interest rate cuts in May and June, as implied by prices in the federal funds futures market, has decreased significantly.
Many Fed officials said they expected to cut rates this year, but were waiting for more data to give them more confidence that inflation was falling toward its 2% target.
