U.S. Producer Prices Climb 0.7% In January, More Than Expected

Producer prices in the U.S. advanced by more than expected in the month of January, the Labor Department revealed in a report released on Thursday.

The Labor Department said its producer price index for final demand climbed by 0.7 percent in January after edging down by a revised 0.2 percent in December.

Economists had expected producer prices to increase by 0.4 percent compared to the 0.5 percent drop originally reported for the previous month.

“The larger than expected increase to producer prices is unwelcome news to the Fed and reinforce the view that further policy tightening is needed to tame inflation,” said Matthew Martin, U.S. Economist at Oxford Economics.

The stronger than expected price growth largely reflected a substantial rebound in energy prices, which spiked by 5.0 percent in January after plummeting by 6.7 percent in December.

The report also said prices for services rose by 0.4 percent for the second straight month, reflecting 0.2 percent upticks in prices for trade and transportation and warehousing services and a 0.6 percent increase in prices for other services.

Meanwhile, the Labor Department said food prices continued to decline, slumping by 1.0 percent in January after falling by 0.9 percent in December.

Excluding prices for food, energy and trade services, producer prices climbed by 0.6 percent in January after edging up by 0.2 percent in December. The increase reflected the largest advance since last March.

While the report also showed the annual rate of producer price growth slowed to 6.0 percent in January from 6.5 percent in December, the year-over-year growth was expected to slow to 5.4 percent.

The Labor Department released a separate report on Tuesday showing U.S. consumer prices increased in line with economist estimates in the month of January.

The report said the consumer price index climbed by 0.5 percent in January following a revised 0.1 percent uptick in December.

Economists had expected consumer prices to rise by 0.5 percent compared to the 0.1 percent dip originally reported for the previous month.

Excluding food and energy prices, core consumer prices rose by 0.4 percent in January, matching a revised increase in December as well as economist estimates.

The Labor Department also said the annual rate of growth in consumer prices slowed to 6.4 percent in January from 6.5 percent in December.

While the year-over-year price growth reflected the smallest increase since October 2021, economists had expected the pace of annual growth to slow to 6.2 percent.

The annual rate of core consumer price growth slowed to 5.6 percent in January from 5.7 percent in December. The pace of growth was expected to slow to 5.5 percent.

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