Markets

Wholesale Prices Rise 1% in January, Up Near-Record 9.7% Over the Past Year

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  • The producer price index, which measures wholesale prices, rose 1% in January and 9.7% for the 12-month period, the latter just off the record high.
  • Core PPI rose 0.9%. Both increases were at least double the Wall Street estimates.
  • Manufacturing in the New York region increased modestly in February but was below expectations. The prices received index soared to a record high.

Prices at the wholesale level jumped twice the expected level in January as inflation pressures were unabated to start the year, the Labor Department said Tuesday.

The producer price index, which measures final demand goods and services, increased 1% for the month, against the Dow Jones estimate for 0.5%. Over the past 12 months the gauge rose an unadjusted 9.7%, close to a record in data going back to 2010.

Excluding food, energy and trade services, co-called core PPI climbed 0.9% for the month, well ahead of the 0.4% estimate. For the 12-month period, the measure increased 6.9%. Both core and headline PPI gains over the year were 0.1 percentage point lower than the record levels hit in December 2021.

As has been the case through much of the Covid pandemic era, goods prices outweighed those for services, rising 1.3% and 0.7% respectively. Final demand energy prices jumped 2.5% in January, while food climbed 1.6%.

The increases come amid burgeoning inflation across the economy, with consumer prices running at a 40-year high.

"PPI offers a window to the price pressures that businesses are facing, and which will likely be passed on to consumers in the way of consumer price inflation in the months to come," PNC economist Kurt Rankin wrote. "Strong gains across the board for businesses reinforce the inflationary concerns that the Federal Reserve is set to battle this year with monetary policy, and which the economy in general has recently begun expressing caution and concern over."

Fed officials plan to act soon to contain the price rises, with interest rate hikes expected to begin in March and continue throughout the year. The White House in a statement said it respects the Fed's independence and urged Congress to vote on two nominees to the board of governors.

President Joe Biden "will continue to make progress on his three-part plan of addressing supply chain disruptions; lowering kitchen tables costs with his Build Back Better agenda; and promoting more competition," the statement said.

A separate report Tuesday morning showed that manufacturing activity in the New York region was little changed in February. The Empire State Manufacturing Survey, conducted by the New York Fed, registered a 3.1 reading, up from -0.7 in January but below the 11 estimate.

The gauge represents the percentage difference between companies reporting expansion against those seeing contraction.

New orders and hiring posted significant gains, but they were mostly outweighed by declines in general business conditions and unfilled orders. Inflation also showed up in that report, with the prices received index spiking 17 points as 58.6% of companies disclosed getting higher prices while just 4.5% reported a decrease. The reading of 54.1 was a record high in data going back to July 2001.

The numbers come a day after the New York Fed's Survey of Consumer Expectations for January saw a surprise decrease in short- and medium-term inflation expectations. The one-year outlook decreased to 5.8% from 6% the previous month, while the three-year expectations slid half a percentage point to 3.5%.

Market-based inflation measures over five- and 10-year spans remain elevated but are off the spikes they saw in November 2021.

Still, the Fed is prepared to tighten monetary policy after two years of unprecedented accommodation. Nearly all central bank policymakers say they expect a rate increase next month, and the market is pricing in a strong possibility of a 1.75 percentage point increase by the end of 2022.

Correction: The Empire State Manufacturing Survey showed unfilled orders declined. An earlier version misstated the category.

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