US PRODUCER prices increased more than expected in January amid strong gains in the costs of services, which could amplify worries that inflation was picking up.

The producer price index (PPI) for final demand rose 0.3 per cent last month after declining by a revised 0.1 per cent in December, the Labor Department’s Bureau of Labor Statistics said on Friday (Feb 16). The increase ended three straight monthly decreases in the PPI.

Economists polled by Reuters had forecast the PPI rebounding 0.1 per cent following a previously reported 0.2 per cent drop.

In the 12 months through January, the PPI increased 0.9 per cent after climbing 1 per cent in December.

Government data this week showed a stronger-than-expected increase in consumer prices in January, fanning fears that inflation was picking up after months of cooling.

Some of the components in the CPI and PPI baskets go into the calculation of the personal consumption expenditures (PCE) price indexes, the measures tracked by the Federal Reserve for its 2 per cent inflation target. The PCE inflation data is due to be released at the end of the month.

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Financial markets expect the US central bank to deliver its first interest rate cut in the first half of the year, though the timing remains uncertain, with the odds shifting in favour of May from March. Some economists are leaning towards June, citing a still-tight labour market.

Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 to 5.5 per cent range.

The narrower measure of PPI, which strips out food, energy and trade services components, jumped 0.6 per cent in January after gaining 0.2 per cent in the prior month. The so-called core PPI increased 2.6 per cent on a year-on-year basis, the same rate of increase as in December. REUTERS