U.S. Producer Prices Fell in December

The Producer Price Index for Final Demand fell 0.5% m/m in December following a downwardly revised 0.2% m/m gain in November (initially +0.3% m/m). The y/y rate of advance continued to moderate, slowing to 6.2% y/y in December from 7.3% in November and a recent peak of 11.7% last March. The Action Economics Forecast Survey had expected a 0.1% m/m decline.

The PPI less food, energy and trade services edged up 0.1% m/m in December, in line with expectations, after a 0.3% m/m increase in November. The y/y rate also slowed to 4.6% in December from 4.9% in November and a recent peak of 7.1% in March 2022. The PPI excluding just food and energy prices rose 0.1% last month, also in line with expectations, with the y/y rate slowing to 5.5% from 6.2% in November.

The December decline was concentrated in lower final demand goods prices, which fell 1.6% m/m (+8.0% y/y) following a 0.1% m/m rise in November. Food prices fell 1.2% m/m in December, their first decline in four months, but were still up 14.3% from a year ago. Energy prices tumbled 7.9% m/m, their second consecutive monthly decline (-3.2% m/m in November) and were up just 9.1% from a year ago, their slowest annual rate of advance since February 2021 and well below the June 2022 peak rate of 52.9%. Nearly half of the December decrease in the index for final demand goods prices can be traced to a 13.4% m/m decline in the price of gasoline.

By contrast, final demand services prices increased 0.1% m/m in December, a slight slowdown from the 0.2% monthly gains in both October and November. The y/y rate slowed to 5.0% in December, its slowest since April 2021, from 5.8% in November. Much of the increase in services prices in December was due to a 0.3% m/m (8.7% y/y) in the prices of final demand trade services, its largest advance in four months. This reflected a 17.6% m/m jump in margins for fuels and lubricants retailing. Conversely, the index for final demand transportation and warehousing services fell 0.2% m/m, while prices for final demand services less trade, transportation, and warehousing were unchanged.

Construction product prices were unchanged (+18.5% y/y) in December following a 0.1% monthly gain in November. Construction product prices for private capital investment edged up 0.1% (+19.9% y/y) and government construction costs were unchanged (+16.1% y/y).

Intermediate goods prices fell 2.8% m/m (+4.7% y/y) in December, their sixth consecutive monthly decline. Processed food prices fell 0.8% m/m and processed energy goods prices plunged 10.9% m/m, their largest monthly decline since April 2020.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver’s USECON database. Further detail is contained in PPI and PPIR. The expectations figures are available in the AS1REPNA database.