US Producer Inflation Trends Higher; Labour Market Remains Stable

• U.S. producer prices increased solidly in January, offering more evidence inflation was picking up again and strengthening financial market views that the Federal Reserve would not be cutting interest rates before the second half of the year.
• The broad rise in producer inflation reported by the Labour Department on Thursday, February 13, 2025, followed on the heels of news on Wednesday that consumer prices accelerated by the most in nearly 1 and a half years in January. Some details of the report, however, suggested a more moderate increase in January in the key inflation measures tracked by the U.S. central bank for its 2% target than had been anticipated in the wake of the strong CPI data.
• The producer price index for final demand rose 0.4% last month after an upwardly revised 0.5% gain in December, the Labor Department's Bureau of Labor Statistics (BLS) said. Economists polled by Reuters had forecast the PPI to rise 0.3%.
• In the 12 months through January, the PPI advanced 3.5% after increasing by the same margin in December. With January's PPI report, the BLS updated weights to reflect price movements in 2024, and seasonal adjustment factors, the model that the government uses to iron out seasonal fluctuations from the data. The rise in the PPI was across goods and services.
• With the 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%. That was lower than the 0.4% gain most had forecast after the CPI data. Core inflation climbed 0.2% in December. It was forecast to increase by 2.6% year-on-year in January, down from the 2.7% estimated following the CPI report. Annual core inflation was 2.8% in December.
• "The Fed still can declare, therefore, that progress in returning inflation to its 2% objective is still being made," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

(Source: Reuters)