Bidenflation’s Back: Producer Prices Jump More Than Expected as Inflation Reignites in January

The prices of goods and services sold by U.S. businesses rose at a faster rate than expected in January and the disinflation in December was weaker than previously thought, data from the Labor Department’s producer price index showed.

The producer price index for final demand—which tracks what U.S. businesses charge for goods and services sold to their end-users in the private sector, government, and around the world—rose by a sharp 0.7 percent in January, the fastest increase in prices since June of last year. Compared with a year ago, the producer price index is up six percent.

The numbers represent an acceleration of inflation after prices took a breather in December. In December, the producer index fell 0.2 percent, revised from the preliminary report showing the index fell 0.5 percent. In November, the index was up 0.3 percent.

Economists had forecast a milder return of inflationary pressures. The month-t0-month increase was projected to rise 0.4 percent and the year-over-year figure was expected to rise 5.5 percent.

Many economists expected that goods inflation would continue to moderate, perhaps even reversing, as supply-chain difficulties eased and consumer demand rotated away from goods into a more traditional balance with services. Goods inflation, however, picked up to a 1.2-percent rise in January, the steepest increase since a 2.1 percent jump in June. A five percent increase in energy prices was the biggest contributor to the rise. Food prices actually declined by one percent.

Prices for final demand services also moved higher, increasing 0.4 percent, matching the December gain.

The index for final demand goods less foods and energy—so-called core goods prices—increased 0.6 percent, the largest increase since May of 2022. Transportation and warehousing services also advanced 0.2 percent.
The index for final demand less foods, energy, and trade services—often referred to as “core core” producer prices—rose 0.6 percent in January
2023, the largest advance since moving up 0.9 percent in March 2022. For the 12 months ended in January 2023, core-core prices rose 4.5 percent.