US Producer Prices Exceed Expectation in January

Egg cartons for sale are displayed at a grocery store in Grosse Pointe, Mich., on Feb. 7, 2025. AP Photo/Paul Sancya

U.S. wholesale prices saw a larger increase than anticipated last month, but some details suggest that inflation may ease.

The Bureau of Labor Statistics (BLS) reported on Feb. 13 that the producer price index (PPI) rose 0.4 percent in January, seasonally adjusted, following a 0.5 percent rise in December 2024 and a 0.2 percent gain in November 2024, and exceeding the consensus forecast of 0.3 percent. Year over year, it climbed 3.5 percent.

The core PPI, which excludes food and energy, increased by 0.3 percent, matching expectations.

The BLS defines the PPI as a measure of the selling prices received by domestic producers for their output. It is widely known as a pre-indicator of inflation because it reflects the cost of production.

According to the report, a 5.7 percent increase in traveler accommodation services contributed to one-third of the index’s rise, making it the largest single contributor. Automobile, food, apparel, and bundled wired telecommunications access services also went up.

In contrast, profit margins for fuel and lubricant retailing fell by 9.8 percent, while prices for securities brokerages and physician care also decreased.

“PPI ran hot in January, but cool increases in healthcare services point to a better core PCE read for the month,” Bill Adams, chief economist for Dallas-based Comerica Bank, told The Epoch Times via email. “Healthcare services prices fell, suggesting the month’s PCE inflation won’t be as bad as the CPI or PPI.”

The personal consumption expenditures (PCE) price index is a measure of total spending by households on goods and services in an economy, and it is the Federal Reserve’s preferred measure of inflation. The next PCE report, which includes data for January, is scheduled to be released on Feb. 28.

The consumer price index (CPI), which reflects the final price paid by consumers at the retail level, increased 0.5 percent in January, marking the biggest gain since August 2023, when it rose by 0.4 percent.

Meanwhile, Adams said that the January PPI report “does not change expectations for the Fed to hold interest rates unchanged near-term and cut a quarter percent by year-end.”

Last month, the Federal Reserve’s rate-setting Federal Open Market Committee voted unanimously to maintain the benchmark interest rate within a range of 4.25–4.5 percent.

In testimony before the Senate Banking Committee this week, Federal Reserve Chair Jerome Powell affirmed his position on refraining from cutting interest rates.

U.S. stock markets rose following the PPI report.

“Markets being more focused on the strong labor market instead of lumpy inflation data is a very good sign,” Jamie Cox, managing partner for Virginia-based Harris Financial Group, told The Epoch Times via email. “The strong economic backdrop being intact is the story that matters most.”