Summary: Prices received by US producers (PPI) rise by 0.2% in December, half 0.4% expected; annual rate eases from 9.9% to 9.8%; “core” PPI increases by 0.5%; lower fuel, food prices helping; “some indications” prices near peak.
Around the end of 2018, the annual inflation rate of the US producer price index (PPI) began a downtrend which continued through 2019. Months in which producer prices increased suggested the trend may have been coming to an end, only for it to continue, culminating in a plunge in April 2020. Figures returned to “normal” towards the end of that year but recent months’ annual rates have been well above the long-term average.
The latest figures published by the Bureau of Labor Statistics indicate producer prices rose by 0.2% after seasonal adjustments in December. The increase was half the 0.4% rise which had been generally expected and much less than November’s revised figure of 1.0%. On a 12-month basis, the rate of producer price inflation after seasonal adjustments eased from November’s revised rate of 9.9% to 9.8%.
PPI inflation excluding foods and energy, or “core” PPI inflation, rose by 0.5% after seasonal adjustments, in line with expectations but less than November’s 0.9% rise. The annual rate accelerated from November’s revised rate of 8.0% to 8.3%.
“Lower gas prices are helping to reduce inflation. Food prices also fell 0.6% following recent lifts. New vehicle prices are still elevated due to a lack of inventory but vehicle prices are expected to ease soon,” said ANZ economist Kishti Sen. He noted “there are some indications that prices may now be near their peak.”
US Treasury bond yields fell on the day. By the close of business, the 2-year Treasury yield had lost 2bps to 0.89%, the 10-year yield had shed 4bps to 1.70% while the 30-year yield finished 5bps lower at 2.03%.
The producer price index (PPI) is a measure of prices received by producers for domestically produced goods, services and construction. It is put together in a fashion similar to the consumer price index (CPI) except it measures prices received from the producer’s perspective rather than from the perspective of a retailer or a consumer. It is another one of the various measures of inflation tracked by the US Fed, along with core personal consumption expenditure (PCE) price data.