(Bloomberg) — US wholesale inflation unexpectedly cooled in December, helped by a drop in food costs and flat services prices which will 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, in response 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 12 months earlier, the general PPI climbed 3.3% and core measure advanced 3.5%, each the best 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 because 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 non-public 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, nonetheless, jumped by probably the most since March 2022.
Stubborn inflation within the closing months of 2024, combined with a resilient job market, encouraged Fed policymakers to dial back their expectations for interest-rate cuts this 12 months.
Food Prices
The PPI report showed a 0.1% decline in food prices, including a virtually 15% slide in the associated fee of vegetables. Egg prices, which soared nearly 56% in November on account of 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 best in seven months. Those advances followed sharp gains late last 12 months in cocoa and occasional.
Meanwhile, the PPI report showed services prices were unchanged, certainly one of the tamest readings of 2024 and reflecting declines in margins.
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