Wholesale prices in the US accelerated again last month, the latest sign that inflation pressures in the economy remain elevated and might not cool in the coming months as fast as the Federal Reserve or US President Joe Biden’s administration would like.
The Labor Department said yesterday that its producer price index (PPI) — which tracks inflation before it reaches consumers — rose 0.6 percent from January to last month, up from a 0.3 percent rise the previous month. Measured year over year, producer prices rose by 1.6 percent last month, the most since September last year.
The figures could present a challenge for the Fed, which meets next week and is counting on cooling inflation as it considers when to cut its benchmark interest rate, now at a 23-year high.
Photo: EPA
The Fed raised rates 11 times in 2022 and last year to fight high inflation. A rate cut by the Fed could boost the economy and financial markets because it would likely ease borrowing costs over time for mortgages, auto loans and business lending.
Higher wholesale gas prices, which jumped 6.8 percent just from January to last month, drove much of last month’s increase. Wholesale grocery costs also posted a large gain, rising 1 percent.
Yet even excluding the volatile food and energy categories, “core” inflation was still higher than expected last month. Core wholesale prices rose 0.3 percent, down from a 0.5 percent jump the previous month. Compared with a year ago, core prices climbed 2 percent, the same as the previous month.
The PPI can provide an early read on where consumer inflation is headed. It is also closely watched because some of its data is used to compile the Fed’s preferred inflation gauge, known as the personal consumption expenditures price index.
A separate report yesterday showed that retail sales grew 0.6 percent from January to last month, after a sharp fall of 1.1 percent the previous month. The data points to cooling consumer demand, with many consumers having run through their pandemic-era savings and putting more spending on credit cards.
A more cautious consumer could provide some reassurance to the Fed that the economy is cooling a bit, a trend that could potentially lower inflation over time.
Thursday’s data follows a report earlier this week on the government’s most closely watched inflation measure, the consumer price index (CPI). The CPI rose by a sharp 0.4 percent from January to last month and was up 3.2 percent compared with a year earlier.
Still, the acceleration in producer prices suggested that inflation could stay elevated into the spring. Economists and Wall Street traders expect the Fed to cut its benchmark rate in June, but that could slip into later in the year.
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