U.S. Wholesale Prices Rise in Another Sign of Inflation Pickup

Komal Sri-Kumar Says Don't Expect a Pick Up in Inflation

U.S. wholesale prices rose in January on costs of energy and hospital services, underscoring signs of stronger inflation in the economy that have sent bond yields soaring this month, a Labor Department report showed Thursday.

Highlights of Producer Prices (January)

  • Producer-price index rose 0.4% m/m (matching est.) after no change the prior month
  • PPI rose 2.7% from a year earlier (est. 2.4%) after 2.6% gain in prior 12-month period
  • Excluding food and energy, core gauge increased 0.4% m/m (est. 0.2% rise), rose 2.2% y/y (est. 2%)

Key Takeaways

The gain in the PPI follows a report Wednesday showing consumer prices rose more than expected in January, indicating inflation is revving up and may help the Federal Reserve’s preferred gauge get closer to its target. Yields on 10-year Treasuries reached a four-year high following Wednesday’s figures and after wage data roiled markets this month on concerns that the Fed will raise borrowing costs more aggressively.

The PPI excluding food, energy, and trade services, a measure some economists prefer because it strips out the most volatile components, rose 2.5 percent in January from a year earlier -- the fastest in data back to August 2014 -- following a 2.3 percent gain.

The overall producer-price index reflected a 0.7 percent gain in the cost of goods and a 0.3 percent increase in services prices. Prices for hospital outpatient care rose 1 percent, the most since 2014, and were a “major factor” in the January rise in the services gauge, according to the report.

Apparel retailing, a category that helped drive the outsize gain in the consumer price index, rose by the most in a year, while wireless telecommunications services fell by the most since last February.

Other Details

  • Excluding the volatile categories of food, energy, and trade services, producer costs rose 0.4 percent from the previous month, the most since April, following a 0.1 percent increase
  • Energy prices rose 3.4 percent from the prior month as gasoline climbed 7.1 percent; food costs fell 0.2 percent, as chicken-egg prices plunged 38.9 percent

— With assistance by Kristy Scheuble

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