U.S. producer prices rise sequentially in January stronger energy prices, likely to ease in months ahead

U.S. producer prices surprised to the upside in the month of January. On a sequential basis, the final demand PPI rose 0.4 percent, one tenth higher than Barclays’ projection. Energy prices rose robustly by 3.4 percent, helping stimulate the overall PPI. Moreover, core prices, which exclude energy, food and trade also saw solid rises, with core rate rising 0.4 percent sequentially, as compared with consensus expectations of 0.2 percent.

On a year-on-year basis, the producer price index came in stronger than December’s print, rising 2.7 percent, whereas the core rate rose 2.3 percent. Overall, the report indicates a widespread strengthening of producer prices in January. But some of this was due to stronger energy prices, and therefore, some reversal in headline PPI is expected in months ahead, noted Barclays in a research report.

Delving into details, goods PPI rose robustly by 0.7 percent sequentially, mainly driven by energy prices, while the deflation in food prices eased a bit. Services PPI recovered 0.3 percent sequentially, driven by equal-sized rises in trade and transportation & warehousing prices. Personal consumption PPI rose 0.5 percent sequentially and 2.4 percent year-on-year, in line with the solid CPI inflation figure seen yesterday. The annual pace of growth in personal consumption PPI is lower compared to December; however, it is still a solid print. Stripping energy, food and trade, PPI personal consumption rose 0.4 percent.

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