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U.S. Producer Prices Rise 0.2% Amid Higher Food Prices

U.S. Producer Prices Rise 0.2% Amid Higher Food Prices

With an increase in food prices offsetting a drop in energy prices, the Labor Department released a report on Wednesday showing a modest increase in U.S. producer prices in the month of January.

The Labor Department said its producer price index rose by 0.2 percent in January after falling by 0.3 percent in December. Economists had expected prices to increase by about 0.3 percent.

Over three quarters of the increase in producer prices was due to higher food prices, which rose by 0.7 percent in January following a 0.8 percent drop in December.

The rebound in food prices reflected a 39 percent jump in prices for fresh and dry vegetables as well as higher prices for soft drinks and candy and nuts.

Meanwhile, the report also showed that energy prices fell for the fourth consecutive month, dipping by 0.4 percent in January after sliding by 0.6 percent in December.

The continued decrease in energy prices was largely due to a 2.1 percent decrease in prices for gasoline. However, economists noted that gasoline prices have rebounded in recent weeks.

Excluding food and energy prices, the core producer price index edged up by 0.2 percent in January following a 0.1 percent increase in the previous month. The increase matched economist estimates.

A 2.5 percent jump in prices for pharmaceutical products contributed to the increase by the core index along with higher prices for communication and related equipment.

Compared to the same month a year ago, the producer price index was up by 1.4 percent in January, reflecting a modest acceleration from the 1.3 percent growth seen in December.

Core producer prices increased at an annual rate of 1.8 percent in January, reflecting the slowest rate of growth since February of 2011. Core prices rose 2.0 percent year-over-year in December.

Lindsey Piegza, an economist at FTN Financial, said, "Inflation remains well in check, reinforcing the Fed's pledge to keep the fed funds rate low and continue to support economic activity through increased asset purchases."

"Many Fed officials have been increasingly outspoken regarding possible timelines for paring back or even ending QE," she added. "With the Fed's soft targets for unemployment and inflation still well off in a distance, it appears anticipatory discussion of a change in Fed policy remains premature."

Thursday morning, the Labor Department is scheduled to release a separate report on consumer price inflation in the month of January.

Economists expect consumer prices to edge up by 0.1 percent in January after coming in unchanged in December. Core prices are expected to rise by 0.2 percent compared to the 0.1 percent increase reported for the previous month.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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