US producer prices unexpectedly fall
Sunday, 14 January 2024
WASHINGTON, Jan 13 (Reuters): US producer prices unexpectedly fell in December amid declining costs for goods such as diesel fuel and food, suggesting inflation would continue to subside and allow the Federal Reserve to start cutting interest rates this year.
The report from the Labor Department on Friday, which also showed prices for services were unchanged for the third straight month, implied that a pick-up in consumer prices last month was likely a blip. It led economists to anticipate that the key price measures tracked by the US central bank for its 2 per cent inflation target rose moderately in December from the prior month.
"The inflation pipeline is clearing and consumer prices will gradually get to the Fed's 2 per cent target," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. The producer price index for final demand dipped 0.1 per cent last month, the Labor Department's Bureau of Labor Statistics said. Data for November was revised to show the PPI falling 0.1 per cent instead of being unchanged as previously reported. The PPI has now declined for three consecutive months.
Economists polled by Reuters had forecast the PPI rebounding 0.1 per cent. Goods prices dropped 0.4 per cent, with a 12.4 per cent decline in the cost of diesel fuel accounting for half of the decrease.
Goods prices fell 0.3 per cent in November. They have dropped for three straight months. Excluding food and energy, goods prices were unchanged after edging up 0.1 per cent in November. The weakness also suggested that goods deflation remained in force despite an uptick in consumer goods prices in December following two straight monthly decreases.
Food prices slipped 0.9 per cent last month, with the cost of eggs tumbling 20.5 per cent, but reversing only a fraction of the 71.2 per cent surge in November. An outbreak of avian flu at some commercial farms was behind the spike in prices in November. Wholesale passenger car prices fell 3.0 per cent. But gasoline prices increased 2.1 per cent.