(Bloomberg) — U.S. wholesale inflation unexpectedly cooled in December, helped by a drop in food costs and flat services prices that could help temper concerns about continued price pressures.
Most read from Bloomberg
The final demand producer price index rose 0.2% from a month earlier, according to a Bureau of Labor Statistics report released Tuesday. The average forecast in a Bloomberg survey of economists called for a gain of 0.4%. A measure excluding food and energy remained unchanged from November.
Compared to a year earlier, total PPI rose 3.3% and the core measure rose 3.5%, both the highest since February 2023.
The PPI report precedes the more closely watched Consumer Price Index, expected from the BLS on Wednesday. Investors and consumers have upgraded inflation expectations in recent weeks due to robust demand and as the incoming Trump administration threatens higher tariffs on imported goods.
Treasury yields fluctuated and futures on the S&P 500 index remained higher, while the dollar fell after the data.
Economists are paying close attention to the PPI report because several of its components contribute to the Federal Reserve’s preferred inflation measure: the personal consumption expenditures price index.
These categories were mixed in December, including no change in hospital care and modest gains in physician services and portfolio management. However, airfares have increased the most since March 2022.
Stubborn inflation in the final months of 2024, combined with a resilient labor market, encouraged Fed policymakers to adjust their expectations for rate cuts this year.
Food prices
The PPI report showed a 0.1% drop in food prices, including a nearly 15% drop in the cost of vegetables. Egg prices, which rose nearly 56% in November due to a worsening bird flu outbreak, barely rose last month. Energy prices rose by 3.5%.
Total goods prices rose 0.6%, after rising 0.7% a month earlier. Commodity prices excluding food and energy remained unchanged.
Commodity prices have generally increased. Crude oil futures rose to a five-month high on Monday, while corn futures climbed to a seven-month high. This progress followed sharp gains late last year in cocoa and coffee.
Meanwhile, the PPI report showed services prices were unchanged, one of the tamest figures of 2024 and a reflection of the decline in margins.
(Adds image)
Most read from Bloomberg Businessweek
