U.S. PPI Jumps Again With Energy Price Strength

Producer prices continued strong last month led by another jump in fuel costs. In addition, food price inflation has picked up considerably. Together, this strength lifted the finished goods PPI by 1.4% last month and increased the 12-month change to 5.0%; the strongest since late-2008. Finally, the January increase exceeded Consensus expectations for a 0.8% rise. 

Higher energy costs led the strength in the PPI last month. The 5.1% m/m gain raised the y/y increase to 21.5%, its strongest since September 2008. Gasoline prices increased 10.4% (69.5% y/y) and fuel oil costs rose 11.0% (28.4% y/y). But elsewhere, the gain in energy prices was more moderate. Natural gas prices increased a lesser 2.4% and were down 12.5% from 12 months ago. Food prices were another source of price strength last month. They posted a 0.4% gain which raised the y/y change to 1.5% versus the low of -4.0% last summer. Fresh fruit & vegetable prices ballooned 43.8% y/y while pork prices jumped 11.8%. Also to the upside were dairy product prices by 5.1% and coffee prices by 2.3% y/y versus a 0.1% uptick last year..  

Producer prices excluding food & energy rose 0.3%. That was enough to stabilize the y/y change at 1.0% but it still was down from a 3.4% 2008 increase. The m/m increase in the core PPI also exceeded expectations for a modest 0.1% gain. The PPI for finished consumer goods less food & energy rose 0.4% (1.6% y/y) and was up from a 0.1% December gain. Finished durables prices increased 0.3% (0.7% y/y) while core finished consumer nondurable goods prices rose 0.4% (2.4% y/y). Capital equipment prices increased 0.3% which left prices up 0.1% y/y.

Prices for intermediate goods jumped 1.7% reflecting the strength in energy prices. The increase in core prices was, however, stable at 0.5%. Food prices fell 0.3% but the y/y gain at 1.7% was up from 8.2% price deflation during all of last year. Copper prices (55.3% y/y) and nonferrous wire & cable prices (25.1% y/y) have been notably strong. The crude materials PPI jumped again with the strength in energy prices. The 9.6% m/m increase was the strongest since 2006 and raised prices by one-quarter versus last January. Core prices also jumped. The 6.6% gain lifted prices by more than one-third y/y as economic growth strengthened following the recession.

The producer price data is available in Haver's USECON database. More detailed data is in the PPI and in the PPIR databases.

The minutes to the latest meeting of the Federal Open Market Committee can be found here.