Prices paid to U.S. producers jumped in January by more than forecast, pointing to persistent inflationary pressures as companies contend with supply-chain and labor constraints.
The producer price index for final demand increased 9.7% from January of last year and 1% from the prior month, Labor Department data showed Tuesday. The gain from December was the largest in eight months. The median forecasts in a Bloomberg survey of economists called for a 9.1% year-over-year increase and a 0.5% monthly advance.
The figures, which reflected broad increases across categories, further reinforce the Federal Reserve’s intentions to begin raising interest rates next month amid mounting inflation throughout the economy. Transportation bottlenecks, robust demand and labor constraints experienced through 2021 have carried over into this year and risk keeping price pressures well-elevated.
The latest monthly advance indicates inflationary pressures in the production pipeline remain intense, which will continue to filter through into final costs of consumer goods and services.
Data last week showed that consumer prices surged in January by more than forecast, sending the annual inflation rate to a fresh four-decade high.
Following the CPI report, some Fed officials came out in favor of more aggressive policy action at the central bank’s March meeting. But centrists among the top Fed officials appear skeptical of a half-point hike, and have suggested that there is little need to start a hiking cycle with a half percentage point move move.
Category Breakdown
The cost of energy rebounded in January after falling a month earlier, rising 2.5%. So far this month, crude oil and other energy prices have continued to climb on risks that a Russian attack on Ukraine would prompt serious sanctions by western governments.
Excluding the volatile food and energy components, the so-called core PPI increased 0.8% from a month earlier and was up by a 8.3% from a year ago.
Prices of goods accelerated in January from a month earlier, rising 1.3%, the most in three months.
The cost of services advanced 0.7%, matching the prior month. The report captures changes in prices paid to producers as well as margins received by wholesalers and retailers. A major factor in the January increase in the index for final demand services was hospital outpatient care prices, which rose 1.6%.
Producer prices excluding food, energy, and trade services -- a measure often preferred by economists because it strips out the most volatile components -- rose 0.9% from December, the most in a year. Compared with a year earlier, the gauge advanced 6.9%.
Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, rose 1.7% from a month earlier. Compared with a year earlier, the measure was up 24.1%.
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