Labor Department PPI Shows Wholesale Inflation Ticking Higher

InflationWholesale inflation was on the rise in December. The Labor Department released its Producer Price Index (PPI), showing a rise of 0.4% from the prior month and a rise of 1.2% from December 2012. Bloomberg and Dow Jones were both calling for a 0.4% rise.

The good news is that since the time covered, we have already seen oil back off of its highs from $100 at the end of December to $93 or so now. Still, the core PPI, ex-food and energy, was up 0.3% in December, versus expectations of only a 0.1% gain. That translates to a 1.4% annual gain from December of 2012.

Food prices were down by 0.6%, but energy prices were up by 1.6% (gasoline up 2.2%). Inflation numbers such as these may seem higher on the surface, but they are still about half of the threshold that the Federal Reserve has set. Some in the Fed (and outside of the Fed) would actually like to see inflation rise more than it has.

24/7 Wall St. would caution readers that it generally takes more than just one or two months of slightly higher PPI before it translates into higher prices at the register for consumers. Businesses just have a hard time passing on price hikes in many cases, and it often takes a few months of higher prices in the system before the prices trickle down into a noticeable price hike at the register.


Filed under: Economy

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