Wholesale prices in the U.S. rose in January for the first time in four months, reflecting higher costs for food and pharmaceuticals.
The producer-price index climbed 0.2 percent after a 0.3 percent drop in December, the Labor Department reported today in Washington. The median estimate in a Bloomberg survey of 74 economists projected a 0.3 percent increase. So-called core producer costs, which exclude volatile food and energy prices, also increased 0.2 percent.
While demand for commodities is starting to pick up, the global economy is still struggling to kick into a higher gear. Without stronger growth, raw-material costs may remain muted, which leaves Federal Reserve policy makers room to maintain their record monetary stimulus.
“Inflation should be contained in the near-term,” said Christophe Barraud, an economist at Market Securities-Kyte Group in Paris. The second-best forecaster of wholesale prices in the past two years, according to data compiled by Bloomberg, said he doesn’t see “a rise in demand coming from the U.S. or Europe that would lead to much higher prices. Inflation is well below the Fed’s target, and that’s why the Fed is not worried today.”
Economists’ estimates for the price index ranged from a drop of 0.1 percent to a gain of 1.1 percent. Core prices were projected to climb 0.2 percent, the Bloomberg survey showed.
Other figures today showed builders broke ground in January on the most U.S. single-family homes in more than four years and permits for future construction rose, an indication the industry’s momentum carried over into 2013. Starts of one-family homes rose to 613,000 last month, the most since July 2008 and up 0.8 percent from December’s 608,000, Commerce Department figures showed today in Washington. Total housing starts dropped to an 890,000 rate, less than forecast and restrained by a slump in construction of multifamily units.
Stock-index futures were little changed after the reports. The contract on the Standard & Poor’s 500 Index maturing in March rose less than 0.1 percent to 1,528.2 at 8:45 a.m. in New York.
Compared with a year ago, companies paid 1.4 percent more for inputs after a 1.3 percent advance in the 12 months ended in December. The core index increased 1.8 percent in the year ended in January, the smallest gain since February 2011, after a 2 percent advance in the prior period.
The gain in the producer-price index was led by a 0.7 percent increase in food after a 0.8 percent drop a month earlier. More than 75 percent of the increase in the gain in the PPI in January was attributable to food, the Labor Department said. Prices of vegetables jumped 39 percent last month.
Soft-drink costs increased 1.5 percent, the most since May 2011, while prices of candy and nuts also rose.
The cost of wholesale energy declined 0.4 percent in January, the fourth straight decrease. Gasoline, heating oil and natural gas prices all fell during the month.
The price of passenger cars dropped 0.8 percent last month, the biggest decrease since March 2010.
Prices of capital goods rose 0.1 percent last month after no change in December.
The cost of pharmaceutical preparations jumped 2.5 percent in January, the most in a year. Wholesale prices for industrial process control instruments climbed 2.6 percent, the most since January 1997. Communications equipment prices advanced 0.6 percent.
Price pressures at the earliest stage of production picked up 0.8 percent in January after a 1.4 percent gain, according to today’s data. The cost of intermediate goods was unchanged last month.
Americans companies project price gains will be tame this year.
“We haven’t seen much price inflation,” Todd Shelton, president of United Stationers Inc., which distributes office products, said during a Feb. 15 earnings call. “It’s been a fairly stable environment over the last couple of quarters.”
“Right now, we’re looking at a modest inflationary environment for 2013,” Vincent Petrella, chief financial officer of Lincoln Electric Holdings Inc., which manufactures welding products, said during an earnings call the same day.
Limited inflation is giving Fed policy makers the ability to maintain record monetary stimulus to stoke the economy and employment. The central bank said Jan. 30 it will keep purchasing securities at the rate of $85 billion a month. The Fed also said it plans to hold its target interest rate near zero while unemployment remains above 6.5 percent and inflation remains no more than 2.5 percent.
“Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices,” the Federal Open Market Committee said in a Jan. 30 statement. The minutes from the meeting will be released today at 2 p.m. in Washington.
Producer prices are one of three monthly inflation gauges reported by the Labor Department. The consumer-price index, due tomorrow, may have climbed 0.1 percent in January following no change the prior month, according to the median estimate in the Bloomberg survey. The cost of goods imported into the U.S. rose 0.6 percent last month, reflecting higher fuel costs, Labor Department data showed Feb. 13.