U.S. producer prices rose more than expected in January as the cost of services such as hospital outpatient care and portfolio management rose sharply, raising concerns that inflation is accelerating after several months of cooling. has increased.
The increase announced by the Labor Department on Friday was the largest in five months.
The report was released after consumer prices rose in January, and financial markets backed off on expectations that the Fed would begin lowering interest rates in June.
Thursday’s data also showed import prices rose sharply in January.
“The Fed isn’t losing the fight against inflation, but it’s not winning either,” said Christopher Rapkey, chief economist at FWDBONDS in New York. “The data is consistent: January is a problematic month for inflation.”
The final demand producer price index rose 0.3% last month, the largest increase since August 2023, after dropping 0.1% in December, according to the Labor Department’s Bureau of Labor Statistics.
A Reuters poll of economists had predicted that the PPI would rise by 0.1%, down from a previously announced decline of 0.2%.
The PPI rose 0.9% in the 12 months to January after rising 1.0% in December.
Services increased by 0.6%, supported by a 2.2% increase in hospital outpatient treatment, the largest increase since July 2023. Portfolio management fees rose 5.5% after rising 1.4% in December.
Wholesale prices for hotel and motel rooms and legal services also rose.
However, freight transportation costs by road decreased by 1.0%.
The service industry decreased by 0.1% in December.
Wholesale prices fell by 0.2%, marking the fourth consecutive month of decline.
Food prices fell by 0.3%, and energy costs plunged by 1.7%.
Prices excluding food and energy rose 0.3%.
So-called core goods prices rose 0.1% in December.
Portfolio management fees, medical expenses, hotel and motel accommodations, airfare, etc. are included in the calculation of the Personal Consumption Expenditures (PCE) Price Index, a measure tracked by the Federal Reserve toward its 2% inflation target. It’s one of the elements.
Based on CPI and PPI data, economists estimated that the PCE price index, which excludes food and energy, rose about 0.4% in January after rising 0.2% in December.
The core PCE price index is expected to rise 2.9% in the 12 months to January, matching December’s rise.
PCE inflation statistics are expected to be released later this month.
The number of housing starts has decreased
Financial markets still expect the central bank to cut interest rates for the first time this year, but the chances of a rate cut in June have diminished.
Starting in March 2022, the Fed will raise interest rates by 525 basis points, to the current range of 5.25%-5.50%.
The PPI, a narrower measure that excludes components of food, energy and trade services, rose 0.6% in January, following a 0.2% rise in the previous month.
Core PPI rose 2.6% year-on-year, the same rate of increase as in December.
The series of disappointing January statistics also extended to the housing market.
A separate report released Friday by the Commerce Department said single-family home construction fell last month, likely due to bad weather, but growth in future building permits suggests a rebound in coming months.
Single-family housing starts, which account for the bulk of housing construction, fell at a seasonally adjusted annual rate of 4.7% to 1.004 million units last month, according to the Commerce Department’s Census Bureau.
Data for December was revised upward to show that single-family housing starts fell to 1.054 million units, instead of the previously reported 1.027 million units.
Extremely cold weather continued across much of the country that month, likely making it difficult to break ground on new projects.
Retail sales and manufacturing production slumped in January as temperatures fell below normal.
Home construction continues to be supported by a severe shortage of existing homes on the market.
Construction of single-family homes declined in the Midwest, the densely populated South, and the West. It rose in the Northeast.
Last month, permits to build future single-family homes increased by 1.6% to a pace of 1.015 million units.
Construction starts for housing projects with five or more units fell 35.8% to 314,000 units in January.
Overall housing starts fell 14.8% to 1.331 million units in January.
Economists had expected construction starts to remain unchanged at 1.46 million units.
Last month, the number of condominium building permits decreased by 9.0% to 405,000 units.
Overall, the number of building permits was down 1.5% last month to 1.47 million units.
