US producer prices increase more than expected in January
A 0.8% jump in services accounted for the rise in the PPI
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[WASHINGTON] US producer prices increased more than expected in January, likely as businesses passed on higher costs from import tariffs, suggesting inflation could pick up in the months ahead.
The Producer Price Index (PPI) for final demand rose 0.5 per cent last month after advancing by a downwardly revised 0.4 per cent in December, the Labor Department’s Bureau of Labor Statistics said on Friday (Feb 27). Economists polled by Reuters had forecast the PPI gaining 0.3 per cent after a previously reported 0.5 per cent increase in December.
A 0.8 per cent jump in services accounted for the rise in the PPI. That reflected a 2.5 per cent increase in trade services, which measure changes in margins received by wholesalers and retailers. There was a 14.4 per cent surge in margins for professional and commercial equipment wholesaling, suggesting businesses were passing on tariffs.
Prices also increased for apparel, footwear and accessories retailing, as well as chemicals and allied products wholesaling, bundled wired telecommunications access services, health, beauty and optical goods retailing, and food and alcohol retailing.
In the 12 months through January, the PPI increased 2.9 per cent after rising 3.0 per cent in December. The moderation in the year-on-year producer inflation rate reflected last year’s high readings dropping out of the calculation.
The report was delayed by the brief shutdown of the federal government early this month
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Producer goods prices fell 0.3 per cent, with the cost of energy declining 2.7 per cent and food decreasing 1.5 per cent. Excluding food and energy, goods prices soared 0.7 per cent.
Some of the components in the PPI report go into the calculation of the Personal Consumption Expenditures (PCE) Price Indexes, the inflation measures tracked by the Federal Reserve for its 2 per cent target.
Prior to the PPI data, economists estimated that core PCE inflation increased by as much as 0.5 per cent in January, which would translate to a year-on-year advance of 3.1 per cent.
Core PCE inflation rose 0.4 per cent in December and increased 3.0 per cent year-on-year. The government will publish the delayed PCE inflation report on March 13. REUTERS
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