Prices paid to American companies rose more than expected in January as inflation returned to the goods and continued service, highlighting the ongoing legacy of the Biden administration's economic program.
The Bureau of Labor Statistics said Thursday that the producer price index for final demand rose 0.4% from a month ago, following a 0.5% increase, which rose 0.5% in December. The median forecast for Econoday's economist survey sought a profit of 0.3%. Compared to a year ago, producers' price indexes rose 3.5%.
The PPI report showed food prices rose 1.1% as egg prices surged 44% from the previous month as bird flu outbreaks continued to disrupt US poultry flocks. Energy prices rose 1.7%. This indicator, which stripped off food and energy, advanced by 0.3% that month and 3.6% from the previous year.
Final demand service prices rose 0.3% in January. The index of final demand products rose 0.6% in January, rising for the fourth consecutive month. Softening the prices of products was a key reason for the decline in overall inflation last year, which appears to have stagnated last year. Excluding food and energy, the final product price rose modestly by 0.1%.
Product Price Index data is right after the hotter than expected consumer price index report, showing core inflation at the fastest pace since March. The figures have bleaked outlook for multiple Federal Reserve cuts this year, with some economists saying whether policymakers will be cut at all, or the Fed's next move could be hiking. Even in the case, I'm questioning it.
Producer Price Index (PPI) is often misrepresented as a measure of wholesale prices. This is a confusion that goes back to the original name as a wholesale price index. In fact, the index is not a measure of wholesale prices and was renamed in 1978.
The PPI of final demand measures the prices that US companies receive for personal consumption, capital investment, government purchases, and construction. They are paid to foreign producers, so sales tax paid to the government excludes export prices. The well-known consumer price OnDex (CPI) tracks the prices paid by US consumers. This means that export prices are excluded, but includes sales tax. CPI also excludes prices paid by businesses, nonprofits and governments.
The two measurements may vary from month to month, but they are usually tracked together over time. Historically, neither is an indicator of other indicators.
PPI also measures prices at the “intermediate demand” stage. This tracks the price paid to companies selling goods and services before they reach the final stage of production. This includes materials, components and services used in manufacturing, construction and other industries. Unlike the end demand, which measures the price of goods and services sold to end users, intermediate demand can help measure cost pressure early in the supply chain, and insight into potential future inflation trends Provides.
Overall mid-price fell 0.2% in January, but the scale of intermediate-demand processed goods increased by 1%. This was driven by increased energy costs, particularly diesel fuel prices. Excluding food and energy prices, the prices of intermediate-demand processed goods increased by 0.4%. The price of raw goods in interim demand rose 0.5%, also driven by rising energy costs.
Inflation measured with PPI peaked at 11.6% in March 2022, months before the peak of CPI in June 2022. The index has risen steadily again since the recent trough at 2.4% last September.
