Wholesale price gauges rose more than expected in January, but details in the report show that pipeline inflation pressures have eased.
The producer’s price index, which measures what producers get for goods and services, rose 0.4% that month compared to Dow Jones’ estimates, the Bureau of Labor Statistics reported Thursday. did.
Excluding food and energy, the core PPI increased by 0.3% in line with forecasts.
Stock market futures fell sharply after the release, despite a higher than expected headline number, despite Treasury yields. Wall Street strategists cited details of the report suggesting a slightly benign inflation picture.
In particular, some costs associated with healthcare have eased easing. For example, doctor care fell by 0.5%. Additionally, domestic airfares fell by 0.3%, while securities companies’ prices fell by 2.2%.
Over the past year, All-Items PPI has risen by 3.5%, far exceeding the central bank’s target. Futures pricing shows that the market doesn’t expect to cut benchmark interest rates again until October.
The release of the producer and consumer price index is a widely cited inflation gauge, but it is not the main one used by the Fed. Rather, central banks focus on the personal consumption expenditure price index. This will be released by the Ministry of Commerce in late February. PPI and CPI releases give feeds to that scale.
Fed Chairman Jerome Powell on Wednesday pointed out that the Fed is focusing heavily on PCE measures, telling the House Financial Services Committee that “we’re not there yet,” and has said he has said he has “big” “Progress,” but we’re not there yet on inflation.
Citigroup estimates show that, if we put the data together, core PCE measurements could show an increase of 0.22% from 0.45% in December. This will reduce annual inflation to 2.5%, the company said.
The PPI release comes the day after BLS reported that the consumer price index rose 0.5% in the month.
Together, the report pushes back expectations for rate cuts until the second half of the year, but inflation data is volatile and the outlook could change depending on what the months that follow show.
“Wholesale price growth was slightly higher than expected in January, and December reads were adjusted upwards,” said Elizabeth Rayner, senior economist at personal finance site Nerdwallet. “In other words, inflation at the producer level remains high, and one concern is that this inflation can ultimately be passed on to consumers.”
The December figure revision also complicates the inflation picture, bringing gains to 0.5% compared to the previously reported 0.2% increase.
In January, producer prices for the service increased by 0.3%, while products rose by 0.6%. Service prices were led by a 5.7% jump in the Traveler Accommodation Services category. BLS accounts for more than a third of its profits.
On the product side, a 10.4% rise in diesel fuel costs was an important factor. PPI data also reflects a massive jump in egg prices as farmers destroy millions of chickens to prevent the spread of avian flu. Eggs for fresh use exploded 44% higher that month, up 186.4% from a year ago.
In other economic news on Thursday, the Labor Bureau reported that the initial claims for unemployment claims for the week that ended February 8 had little change. The claims reported a total of 213,000, a decline of 7,000 from the previous period and an estimate of 215,000. Continuous bills running one week late fell to 1.85 million, down 36,000.
