U.S. supplier prices rose 6% in January from a year earlier, a sign of still stubborn inflation pressures in the economy.
That increase in the producer-price index, which generally reflects supply conditions in the economy, was slower than December’s 6.5% gain, the Labor Department said Thursday. And it was down markedly from the 11.7% rise in March 2022, the recent peak.
The PPI increased 0.7% in January from the prior month, compared with a revised 0.2% drop in December, and significantly faster than the 0.2% average monthly rise in the year before the pandemic.
The latest data added to investor concerns that the Federal Reserve will need to hold interest rates higher for longer in order to tame inflation. The S&P 500, the Dow Jones Industrial Average and tech-focused Nasdaq Composite all declined shortly after the latest inflation data was released.
The PPI report is a “setback in the battle against inflation,” said
senior economist at PNC. “Today’s producer price increases will translate into tomorrow’s consumer facing price hikes.”
A separate Labor Department report this week showed consumer prices rose 6.4% in January, from a year before, down slightly from 6.5% in December and marking the seventh straight month of easing inflation.
Fed officials in recent public appearances have steeled themselves for a long inflation fight. Earlier this month policy makers raised their benchmark federal-funds rate by 0.25 percentage point, bringing it to a range between 4.5% and 4.75%, the highest level since 2007. Officials are on track to raise interest rates at their meeting in March and to signal further increases will be likely.
“We must remain prepared to continue rate increases for a longer period than previously anticipated if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions,” said Dallas Fed President
in remarks Tuesday in Prairie View, Texas.
The broader economy has shown signs of resilience early this year, after consumers pulled back late last year and several large companies have announced layoffs. The unemployment rate last month fell to 3.4%, the lowest level since 1969, and retail sales jumped 3% in January as consumers broadly boosted spending on vehicles, furniture, clothing and dining out.
Strong demand and low unemployment can put upward pressure on prices.
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The PPI captures what suppliers are charging businesses and other customers. The measure generally reflects the changes in costs that producers are facing combined with the pricing power they command, which can signal future changes to inflationary pressures.
The January report showed goods prices rose from a month earlier, largely reflecting energy products. Good prices had decreased in December. Services prices rose at the same monthly rate as in December.
The so-called core price index—which excludes the often-volatile categories of food, energy and supplier margins—climbed 0.6% in January from a month earlier, after gaining a revised 0.2% in December. On a 12-month basis, core PPI rose 4.5%, a cooling from a revised 4.7% gain in December.
—Gwynn Guilford contributed to this article.
Write to Gabriel T. Rubin at email@example.com
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