Wholesale Prices in U.S. Rose Less Than Forecast in January

U.S. Wholesale Prices Climbed Less Than Forecast in January
An employee at Supervalu Inc. stands in part of a warehouse at a distribution center in Hopkins, Minnesota on Monday, Jan. 9, 2012. Photographer: Ariana Lindquist/Bloomberg

Wholesale prices in the U.S. rose less than forecast in January as food and energy costs dropped, a sign inflation pressures may remain subdued.

The producer price index rose 0.1 percent following a 0.1 percent decrease the prior month, Labor Department figures showed today in Washington. Economists projected a 0.4 percent gain, according to the median estimate in a Bloomberg News survey. The core measure excluding volatile food and energy rose 0.4 percent, more than projected, led by a surge in drug prices.

At the start of a new year, companies may try to test the economy’s ability to absorb price increases in order to recover higher raw-material expenses. Nonetheless, slowing growth from Europe to Asia signal commodity costs will probably stabilize, while a U.S. unemployment rate exceeding 8 percent means households will resist attempts to charge more for goods.

“It’s something that happens at the start of the year, where price increases are passed through and tend to erode,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We’re in a relatively low-inflation environment where commodity prices have come down because the global economy is cooling.”

Other reports today showed that claims for jobless benefits unexpectedly dropped last week to the lowest level in four years, and builders broke ground on more homes than forecast in January.

Fewer Claims

Applications for unemployment insurance payments decreased 13,000 in the week ended Feb. 11 to 348,000, less than the lowest forecast of economists surveyed by Bloomberg and the fewest since March 2008, a Labor Department report showed today. The median survey estimate projected an increase to 365,000.

Housing starts rose 1.5 percent to a 699,000 annual rate from December’s 689,000 pace that was stronger than previously reported, Commerce Department figures showed. The median estimate in a Bloomberg News survey called for a rise to 675,000. Building permits, a proxy for future construction, also climbed.

Stocks were little changed as the better news on the economy helped overcome concern about a Greek debt default. The Standard & Poor’s 500 Index was at 1,343.4 at 9:36 a.m. in New York, up less than 0.1 percent.

The median estimate for producer prices was based on forecasts from 75 economists. Projections ranged from a decline of 0.3 percent to an increase of 0.8 percent.

Survey Results

Core wholesale prices were projected to rise 0.2 percent following the prior month’s 0.3 percent gain, the Bloomberg survey showed.

For the 12 months since January 2011, companies paid 4.1 percent more for goods, down from a 4.8 percent increase in the year to December. The core index increased 3 percent over the past year, the same as in the 12 months ended in December.

The cost of pharmaceutical preparations climbed 2 percent last month, accounting for about 40 percent of the increase in core producer prices, the report showed. A 0.9 percent increase in light-truck prices and a 1.5 percent gain in household appliances, the biggest jump since January 1981, accounted for much of the rest.

Wholesale energy costs fell 0.5 percent in January on a drop in residential natural gas and the biggest decrease in home electric power since June 2004. Food prices decreased 0.3 percent , reflecting declining costs for dairy products, fruits and vegetables.

Intermediate Goods

The cost of intermediate goods dropped 0.4 percent in January, a second consecutive decrease. Crude prices rose 1.5 percent, reversing the 1.5 percent December decline.

“Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable,” the Federal Reserve said Jan. 25. The monetary policy-making committee “also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the committee’s dual mandate” of fostering price stability and maximum employment.

Fed policy makers see inflation declining in 2012 to below their 2 percent goal, with most expecting prices to rise 1.4 percent to 1.8 percent this year, according to forecasts released Jan. 25.

Beacon Roofing Supply Inc., a Peabody, Massachusetts-based roofing materials distributor, said efforts to raise prices to recoup costs were limited for its complementary building products unit, that covers materials like siding, windows and water-proofing systems.

Need Demand

“They still need demand to increase to have some needed price increases take hold,” Paul Isabella, chief executive officer, said on an earnings conference call on Feb. 9.

Producer prices are one of three monthly inflation gauges reported by the Labor Department. The consumer price index, due tomorrow, rose 0.3 percent in January after being little changed the prior month, according to the median estimate in the Bloomberg survey.

The cost of goods imported into the U.S. rose in January for the second time in six months, reflecting higher costs for automobiles and petroleum, Labor Department data showed Feb. 14.

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