The U.S. Bureau of Labor Statistics reported on January 14 that producer price index rose 0.2% in December, less than the 0.4% increase in November.
Excluding food and energy, the core PPI was flat compared with the forecast for a 0.3% rise.
Nationwide Senior Economist Ben Ayers offers this analysis.
Softer producer prices spell cooler inflation trends:
- Aside from a jump in energy costs, input costs were much cooler in December. This tempers the higher end of expectations for tomorrow’s CPI report and clears the way for softer inflation readings in early 2025. Still, tariff uncertainty hangs over costs for producers with many recent survey respondents expressing concerns that costs will climb this year, raising the risk of unexpected inflationary pressures for consumers.
- Final demand services were flat in December to reverse the hotter trend from over the previous four months. While a positive development, this could be a temporary pause, as was seen in July 2024. Food prices also retreated slightly following November’s surge, mainly caused by a jump in egg prices. The core PPI inflation measure (ex. food, energy, and trade services) showed another tame increase, rising 0.1 percent for the second straight month. This confirms that underlying price pressures don’t indicate a renewed surge in inflation in the new year.
- For all of 2024, the headline PPI rose 3.3 percent, trebling the increase shown over 2023. Still, the trend was slightly softer over the second half of 2024 as input costs settled back into pre-pandemic trends. With service costs steadily fading, the upside risk for producer costs in 2025 focuses on goods prices and potential supply chain disruptions caused by trade rancor – but hopefully this is more of a tail risk.
