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Economy in Brief

U.S. Producer Price Rise Is Double Expectations in January
by Tom Moeller  February 15, 2022

• Core goods prices jump again.

• Service prices remain strong.

• Energy & food prices reverse earlier declines.

Pricing power at the wholesale level strengthened last month. The Producer Price Index for Final Demand increased 1.0% (9.7% y/y) during January following a 0.4% December gain, revised from 0.2%. Earlier figures also were revised. A 0.5% January increase had been expected by the Action Economics Forecast Survey. The PPI excluding food and energy rose 0.8% (8.3% y/y) after rising 0.6% in December, revised from 0.5%. Expectations had been for a 0.4% gain. The PPI less food, energy and trade services jumped 0.9% (6.9% y/y) after increasing an unrevised 0.4% in December. These series date back to 2010.

Higher energy prices led last month's increase in the PPI with a 2.5% increase (28.8% y/y) following a 1,7% December weakening. Gasoline prices rose 1.9% (53.3% y/y) and reversed December's decline. Home heating oil prices strengthened 7.3% (47.4% y/y) and reversed two consecutive months of decline. Natural gas prices rose 0.5% last month (25.1% y/y) and the cost of electric power increased 0.5% (6.5% y/y).

Food prices increased 1.6% (12.8% y/y) after easing 0.3% in December. Beef & veal prices surged 6.5% (43.9% y/y) and the cost of dairy products increased 4.5% (12.3% y/y). Vegetable prices rose 8.0% y/y while egg prices strengthened 40.9% y/y.

Final demand for goods prices less foods & energy rose 0.8% (9.4% y/y) after a 0.4% December rise. Finished consumer goods prices less good & energy rose 0.9% in January (7.1% y/y) following a 0.6% rise. Durable consumer goods prices surged 1.0% last month (7.8% y/y) after rising 0.4% in December. The gain was the strongest since October 2008. Core nondurable consumer goods prices improved 0.8% (6.7% y/y) following two months of 0.7% increase. Prices for private capital equipment jumped a record 1.1% (6.6% y/y) after a 0.5% December gain.

Services prices rose 0.7% in January (7.7% y/y) for the second straight month. Trade services prices rose 0.6% (13.3% y/y). Services prices less trade, transportation & warehousing rose 0.9% in January (4.4% y/y) following a 0.2% increase in December.

Construction product prices surged 3.6% (16.1% y/y) following a 0.3% gain. Construction costs for private capital investment rose 4.1% (17.7% y/y) after two months of 0.4% increase.

Intermediate goods prices jumped 1.7% (+24.1% y/y) due to a 3.4% gain (+34.9% y/y) in processed fuel costs.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's USECON database. Further detail is contained in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

The Effects of the "Great Resignation" on Labor Market Slack & Inflation from the Federal Reserve Bank of Chicago is available here.

Producer Price Index (SA, %) Jan Dec Nov Jan Y/Y 2021 2020 2019
Final Demand 1.0 0.4 0.9 9.7 7.0 0.2 1.7
   Excluding Food & Energy 0.8 0.6 0.9 8.3 5.6 0.9 2.1
`   Excluding Food, Energy & Trade Services 0.9 0.4 0.8 6.9 5.1 0.7 2.0
   Goods 1.3 -0.1 0.9 13.1 10.5 -1.4 0.4
      Foods 1.6 -0.3 1.2 12.8 8.7 1.3 1.9
      Energy 2.5 -1.7 0.9 28.8 30.2 -12.6 -4.6
    Goods Excluding Food & Energy 0.8 0.4 0.8 9.4 6.5 0.7 1.4
   Services 0.7 0.7 0.9 7.7 5.3 0.9 2.3
      Trade Services 0.6 1.5 1.1 13.3 7.3 1.6 2.4
   Construction 3.6 0.3 0.4 16.1 5.2 2.3 5.0
Intermediate Demand - Processed Goods 1.7 -0.1 1.5 24.1 19.4 -2.8 -1.4
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