The trend towards US producer inflation is high. The labor market remains stable
By Lucia Mutikani
WASHINGTON (Reuters) – US producer prices rose steadily in January, providing more evidence, and financial markets are seeing a rise in inflation rates again, with the Federal Reserve not cutting interest rates by the second half of the year We have strengthened our views.
The massive increase in producer inflation reported by the Labor Bureau on Thursday followed shortly after Wednesday’s news that consumer prices had accelerated the most in nearly 1-1/2 years in January. However, some details in this report suggest a more moderate increase in January in key inflation measures tracked by the US Central Bank at a target of 2% more than expected in the wake of strong CPI data. It’s there.
Economists warned that inflation will be even higher as President Donald Trump will cause widespread import tariffs and labor shortages, and promote massive deportation that could raise wages and commodity prices.
Kurt Rankin, senior economist at PNC Financial, said: “Taxes are continuing to be threatened by the Trump administration, which will raise the costs of businesses across the board.”
The Labor Bureau’s Bureau of Labor Statistics (BLS) said the producer price index for final demand rose 0.4% last month, following a 0.5% increase in December. Economists voted by Reuters predicted that PPI would rise by 0.3%.
In the 12 months from January to January, PPI has advanced 3.5% after increasing at the same margin in December. With the January PPI report, BLS updated its weight to reflect price movements in 2024, and seasonal adjustment coefficients are the model the government uses to resolve seasonal variations from data.
The rise in PPI was across products and services. After a 0.5% rise in December, wholesale prices rose 0.6%. More than half of the increase came from a jump of 1.7% of the price of energy goods. Food prices rose 1.1%, and egg prices rose 44.0% amid the outbreak of avian flu. Excluding food and energy, product prices rose 0.1% for the second consecutive month.
After a 0.5% increase in December, service has increased by 0.3%. A 5.7% surge in wholesale prices for hotel and motel rooms accounted for more than a third of the increase in service.
There were also rising prices for auto retail wholesale, freight transport by road, food and alcohol retail, retail of apparel, jewelry, footwear and accessories, and wholesale prices for bound telecommunications.
However, fuel and lubricant retailers’ margins fell by 9.8%. Portfolio management fees rose 0.4%, while airline fares fell 0.3%. The price of care for doctors fell by 0.5%, and the cost of care for hospital inpatients fell by 0.3%. Hospital outpatient care prices fell by 0.4%.
Portfolio management fees, healthcare, hotels, motel accommodation and airline fares are the exception of food and energy, one of the measures the Fed tracks for monetary policy, and the personal consumption expenditure (PCE) price index. It is one of the components that enters the calculation.
With CPI and PPI data in hand, economists’ estimates for the increase in the core PCE price index in January ranged from 0.2% to 0.3%. This was lower than the 0.4% gain that most predicted after CPI data. Core inflation rose 0.2% in December. Following the CPI report, an estimate of 2.7% showed that 2.6% in January would increase by 2.6% year-on-year. The annual core inflation in December was 2.8%.
Samuel Toums, Chief Economist of Pantheon Macroeconomics, said:
Wall Street stocks rose as investors focused on expected domesticated core PCE inflation measures. The dollar fell against a basket of currencies. The US Treasury yields have slipped.
A stable labor market
Financial markets pushed back expectations for rate cuts from June to September, but some economists said windows for further policy easing have been closed, citing strong domestic demand and stable labor markets. I believe it.
“We’re nearby, but we’re not inflation,” Federal Reserve Chairman Jerome Powell told lawmakers Wednesday. “For now, I would like to limit policy,” he added.
The Fed left the benchmark without changing overnight interest rates in the 4.25%-4.50% range in January, reducing 100 basis points since the start of the policy easing cycle in September. Policy rates increased by 5.25 percentage points in 2022 and 2023 to tame inflation.
The Trump administration’s fiscal, trade and immigration policies are seen as incitement to inflation. The 25% tariff on goods from Canada and Mexico was suspended until March. However, this month there was an additional 10% charge for Chinese products.
Labor market stability was confirmed by another report from the Department of Labor showing that the initial claims of state unemployment benefits had decreased to 213,000 seasonally adjusted for the week ended February 8th.
Economists had forecast 215,000 bills in the last week.
Claims have fallen so far this year, consistent with historically low layoffs, which helped to help expand the economy. Nevertheless, employment opportunities for those who have lost their jobs are not as abundant as they were a year ago, with companies adopting meetings and attitudes. In January, non-farm salaries increased employment of 143,000, but the unemployment rate was 4.0%.
The number of people who received assistance in the first week of employment agency reduced 36,000 to 1.85 billion seasonally adjusted for the week ending February 1st, claims report has been shown.
“The business sector remains in standby mode if there is disruption in the global supply chain, if there is, or if there is something there is, as price uncertainty makes it more difficult to expand operations. is.
(Reporting by Lucia Mutiati, Editing by Chizu Nomiya and Andrea Ricci)
