The US producer price index (PPI) increased solidly in January, rising 0.4%, according to data released by the Bureau of Labor Statistics. The PPI gained 3.5% year-over-year, up from an upwardly revised 0.5% gain in December.
Economists warned that inflation is set to trend even higher due to President Trump’s tariffs on imports and mass deportations, which could cause labor shortages and raise wages and prices of goods. However, the January PPI report suggests a more moderate increase in key inflation measures than anticipated.
The core consumer price index (CPI) data also showed a 0.4% gain in January, up from a forecasted 0.2-0.3%. This reading was lower than expected after the strong CPI data released earlier.
Despite the rise in producer prices, financial markets remain optimistic about the labor market and interest rates. The dollar fell against a basket of currencies, while US Treasury yields slipped.
The stable labor market, as confirmed by a separate report from the Labor Department, showed initial claims for state unemployment benefits falling 7,000 to a seasonally adjusted 213,000 for the week ended February 8. Nonfarm payrolls increased by 143,000 jobs in January, while the unemployment rate was at 4.0%.
The rise in producer prices is expected to translate into upward pressure on consumer prices in the months to come. However, Federal Reserve Chair Jerome Powell stated that progress in returning inflation to its 2% objective is still being made, suggesting that policymakers may not be ready to cut interest rates before the second half of the year.
Source: https://www.reuters.com/markets/us/us-producer-prices-rise-slightly-above-expectations-january-2025-02-13