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Producer Prices Rise

Producer prices rose in January, according to the Bureau of Labor Statistics. NAM Chief Economist Chad Moutray broke it down for us.

The numbers: “Producer prices for final demand goods and services rose 1.0% in January, accelerating from the 0.4% increase in December and the strongest monthly increase since May,” said Moutray. “At the same time, producer prices for final demand goods increased 1.3% in January, rebounding after edging down 0.1% in December and a four-month high.”

Other highlights:

  • Food and energy costs have jumped 12.9% and 29.4% year-over-year, respectively.
  • Excluding food and energy, producer prices for final demand goods increased 0.8% in January, up from 0.4% in December.
  • Producer prices for final demand services rose 0.7% in January, matching the pace in December.

Year in review: “Over the past 12 months, producer prices for final demand goods and services jumped 9.8% (seasonally adjusted), pulling back from 10.0% in December, which was the largest increase on record for a series dating to November 2009,” said Moutray. “At the same time, core producer prices increased 6.9% year-over-year in January, edging down from a record 7.0% in December.”

The cost of doing business: “Manufacturers continue to cite soaring raw material costs and supply chain disruptions as their top challenges, with the rapid acceleration in prices in this data over the past year helping to explain why,” said Moutray.

The policy angle: “For its part, these data will put continued pressure on the Federal Reserve to tackle inflation,” said Moutray. “The Federal Open Market Committee has already said that it will end all asset purchases by early March, and it will likely start reducing its balance sheet over the summer. In addition, the FOMC will almost certainly increase short-term rates at its March 15–16 meeting, perhaps by 50 basis points (but at least by 25 basis points).”

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