Customers shop at a Costco Wholesale store on December 15, 2023 in Miami, Florida.
Joe Raedle | Getty Images News | Getty Images
Wholesale prices rose more than expected in January, further complicating the inflation picture, a Labor Department report showed Friday.
The producer price index, a measure of the prices received by producers of domestic goods and services, rose 0.3% this month. Economists consulted by Dow Jones had expected an increase of only 0.1%. The PPI fell by 0.2% in December.
Excluding food and energy, core PPI rose 0.5%, also against expectations of a 0.1% gain. The PPI excluding food, energy and trade services rose 0.6%, the largest single-month increase since January 2023.
The report comes just days after the Consumer Price Index showed inflation remaining stubbornly higher despite the Federal Reserve's expectations for moderation throughout the year. The CPI was 3.1% higher than a year ago, lower than December levels, but still well above the Fed's target of 2% inflation.
On a core basis, which the Fed focuses more on as a gauge of longer-term inflation, the CPI rose 3.9%. CPI differs from PPI in that it measures the prices consumers actually pay in the marketplace.
Markets fell sharply after Tuesday's CPI reading, and there were fears that a high PPI figure could also deliver another shock. Expectations are high that the Fed would use declining inflation rates as an incentive to aggressively cut rates this year, but traders have had to adjust those expectations in recent days as inflation has shown unexpected persistence.
Stock market futures fell after the PPI report and government bond yields soared.
A 0.6% increase in final demand helped push the wholesale index higher, which itself was boosted by a 2.2% increase in outpatient hospital care. Goods prices actually fell 0.2% due to a 1.7% decline in final energy demand, while gasoline fell 3.6%.
On a twelve-month basis, the total PPI rose by just 0.9%, slightly lower than the 1% level in December. Excluding food, energy and trading services, however, the index rose 2.6%, after rising 1.8% in December.
Along with troublesome inflation data, the Commerce Department reported this week that retail sales fell 0.8% in January, much more than expected.
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