Supplier prices in the United States increased 6% year over year in January, indicating persistent inflationary pressures in the economy.
The increase in the producer-price index, which typically indicates supply conditions in the economy, was slower than the 6.5% increase in December, according to the Labor Department on Thursday. It was also significantly lower than the recent peak of 11.7% in March 2022.
The PPI rose 0.7% in January from the previous month, compared to a revised 0.2% dip in December, and was much higher than the 0.2% average monthly growth in the year preceding the pandemic.
A separate Labor Department report this week showed that consumer prices grew 6.4% year on year in January, down from 6.5% in December and marking the sixth consecutive month of falling inflation.
In recent public appearances, Federal Reserve officials have braced themselves for a protracted battle against inflation. Fed policymakers hiked their benchmark federal-funds rate by 0.25 percentage point earlier this month, raising it to a range of 4.5% to 4.75%, the highest level since 2007. Authorities are on track to raise interest rates at their March meeting and to suggest that future rises are expected.
“We must remain prepared to continue rate increases for a longer period than previously anticipated if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions,” said Dallas Fed President Lorie Logan in remarks Tuesday in Prairie View, Texas.
When consumers pulled back late last year and some significant corporations announced layoffs, the larger economy showed indications of resiliency early this year. The unemployment rate fell to 3.4% last month, the lowest level since 1969, and retail sales increased 3% in January as consumers increased their spending on autos, furniture, apparel, and dining out.
Prices may rise as a result of strong demand and low unemployment.
The PPI reflects the prices that suppliers charge companies and other consumers. The indicator often represents changes in production costs mixed with pricing power, which might indicate future changes in inflationary pressures.
According to the January report, goods prices increased over the previous month, owing mostly to energy items. Good prices had fallen in December.Prices for services increased at the same monthly pace as in December.
The so-called core price index, which excludes the frequently volatile categories of food, energy, and supplier margins, rose 0.6% month on month in January after rising a revised 0.2% in December. Core PPI grew 4.5% year on year, down from a revised 4.7% growth in December.