(Bloomberg) — US wholesale inflation unexpectedly cooled in December, helped by a drop in food costs and and flat services prices that may help temper concerns of lingering price pressures.
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The producer price index for final demand rose 0.2% from a month earlier, according to a Bureau of Labor Statistics report released Tuesday. The median forecast in a Bloomberg survey of economists called for a 0.4% gain. A measure excluding food and energy was unchanged from November.
Compared with a year earlier, the overall PPI climbed 3.3% and core measure advanced 3.5%, both the highest since February 2023.
The PPI report precedes the more closely watched consumer price index, due Wednesday from the BLS. Investors and consumers in recent weeks have marked up inflation expectations amid robust demand and as the incoming Trump administration threatens higher tariffs on imported goods.
Treasury yields fluctuated and S&P 500 index futures remained higher, while the dollar declined after the figures.
Economists pay close attention to the PPI report because several of its components feed into the Federal Reserve’s preferred inflation measure — the personal consumption expenditures price index.
Those categories were mixed in December, including no change in hospital care and modest gains in physician services and portfolio management. Airfares, however, jumped by the most since March 2022.
Stubborn inflation in the closing months of 2024, combined with a resilient job market, encouraged Fed policymakers to dial back their expectations for interest-rate cuts this year.
Food Prices
The PPI report showed a 0.1% decline in food prices, including a nearly 15% slide in the cost of vegetables. Egg prices, which soared nearly 56% in November due to a worsening bird influenza outbreak, barely rose last month. Energy prices advanced 3.5%.
Overall goods prices increased 0.6% after advancing 0.7% a month earlier. Goods prices excluding food and energy were unchanged.
Commodity prices more generally have been picking up. Crude oil futures rose on Monday to a five-month high, while corn futures climbed to the highest in seven months. Those advances followed sharp gains late last year in cocoa and coffee.
Meanwhile, the PPI report showed services prices were unchanged, one of the tamest readings of 2024 and reflecting declines in margins.
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