Producer Price Index Falls, But Core PPI Tops Economist Expectations

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Producer prices increased 0.3% in December when excluding the volatile food and energy sectors, above economist expectations for the index to rise one tenth of one per cent.

Overall, finished producer prices measured by the labour Department declined by 0.1% for the month, as food and and energy inputs both dropped 0.8%.

“The December decline in finished goods prices is attributable to decreases of 0.8 per cent in the indexes for finished energy goods and finished consumer foods,” the BLS said. “By contrast, prices for finished goods less foods and energy increased 0.3 per cent.” 

Prices of finished goods were mixed during the period, led slightly higher on the rise in the commercial aircraft industry, largely reflecting increases at Boeing.

lntermediate and crude goods both fell, down 0.5% and 1.1%, respectively. Those declines will be beneficial to the apparel industry, as prices of leathers and processed threads dropped 1.5% and 1.7%. 

“Higher prices for iron and steel scrap and for corrugated wastepaper offset declining prices for nonferrous metals and corn,” the Bureau of labour Statistics said in a statement.

Economists have been looking to the headline figure, excluding food and energy, to gauge what the Federal Reserve may do during its next monetary policy meeting. If inflation remains below the central bank’s stated goal of 2.0%, the Fed may be more likely to offer greater quantitative easing. Today’s announcement offers a mixed message to investors.

The Bureau of labour Statistics plans on updating its weightings and prices when it next releases a producer price report. The organisation last updated those metrics in 2007, when it began using 2002 data. The BLS will now use 2007 data.


Minutes away from today’s deluge of data, starting with the producer price index.

Economists polled by Bloomberg expect producer prices to increase 0.1%, an indicator of low inflationary impacts on the country’s manufacturers.

Excluding more volatile categories like food and energy, economists predict the same 0.1% rise, the same as November’s. 

Today’s inflation numbers are important to watchers of Federal Reserve policy, which many analysts have forecast will offer greater quantitative easing. If the headline figure jumps too much, the Fed may be less apt to act.