Producer prices were up 0.4% on the month and 1.2% on the year in December.
This was pretty much in line with expectations for a 0.4% month-over-month and 1.1% year-over-year rise.
Meanwhile, core PPI (ex food and energy) was up 0.3% on the month and 1.4% on the year.
This was ahead of expectations for a 0.1% mum and a 1.3% YoY rise in November.
Nearly half of the December increase in finished core goods can be attributed to the 3.6% increase in prices for tobacco products. This was the biggest one-month spike in six years.
“Manufacturers tend to impose one big price increase per year, in Dec, so this is not the start of a sustained trend,” Ian Shepherdson of Pantheon Macroeconomics said in a note. “With core materials price down 5.9% y/y we see no threat to core finished goods prices for the foreseeable future. To the extent we worry about inflation, the risk is in services – rent – not goods.”
Ahead of the data release, Morgan Stanley’s Ted Wieseman wrotes, “[T]obacco prices are not seasonally adjusted in the PPI report even though there’s been a regular pattern of December cigarette price hikes in recent years. That will probably again provide a boost to the core PPI this December, but excluding tobacco we look for the core to remain near 0.1%.”