U.S. Producer Prices Jump 1.0% In January, Much More Than Expected

Producer prices in the U.S. jumped by much more than expected in the month of January, according to a report released by the Labor Department on Tuesday.

The Labor Department said its producer price index for final demand surged up by 1.0 percent in January after rising by an upwardly revised 0.4 percent in December.

Economists had expected producer prices to increase by 0.5 percent compared to the 0.2 percent uptick originally reported for the previous month.

The sharp increase in producer prices was partly due to a substantial rebound in energy prices, which spiked by 2.5 percent in January after tumbling by 1.7 percent in December.

Food prices also showed a significant rebound, jumping by 1.6 percent in January after dipping by 0.3 percent in the previous month.

Excluding prices for food, energy and trade services, core producer prices advanced by 0.9 percent in January after climbing by 0.4 percent in December.

The report showed prices for services increased by 0.7 percent, reflecting a 0.6 percent advance in prices for trade services and a 0.9 percent jump in prices for other services.

Meanwhile, the Labor Department said the annual rate of producer price growth slowed to 9.7 percent in January from 9.8 percent in December. Economists had expected the yearly growth to slow to 9.1 percent.

The annual rate of growth in core producer prices also decelerated to 6.9 percent in January from 7.0 percent in December.

“The combination of stubborn supply disruptions and elevated energy prices will prevent producer prices from reverting to more normal patterns until later this year,” said Mahir Rasheed, U.S. Economist at Oxford Economics.

He added, “The latest PPI figures reinforce the case for the FOMC to commence rate liftoff at next month’s policy meeting with a rate hike of at least 25bps.”

Last Thursday, the Labor Department released a separate report showing the annual rate of U.S. consumer price growth accelerated more than expected in January.

The report showed consumer prices in January were up by 7.5 percent compared to the same month a year ago, reflecting the fastest annual growth since February of 1982.

Economists had expected the annual rate of consumer price growth to accelerate to 7.3 percent from 7.0 percent in December.

The faster year-over-year growth came as the Labor Department said its consumer price index climbed by 0.6 percent in January, matching the upwardly revised advance seen in December.

Economists had expected consumer prices to rise by 0.5 percent, matching the increase originally reported for the previous month.

The bigger than expected monthly increase in consumer prices reflected higher prices for food, electricity, and shelter.

The report showed core consumer prices, which exclude food and energy prices, also advanced by 0.6 percent in January, matching the increase seen in December. Economists had also expected core prices to rise by 0.5 percent.

Along with higher prices for shelter, the increase in core pries reflected higher prices for household furnishings and operations, used cars and trucks, medical care and apparel.

The annual rate of growth in core prices accelerated to 6.0 percent in January from 5.5 percent in December, showing the biggest jump since August of 1982.

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