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2/17/2016 8:50:00 AM Write a Letter to the Editor Write a letter to the Editor

Wholesale Prices Unexpectedly Rise on Higher Food Costs

Daniel Acker/Bloomberg News

Wholesale prices in the United States unexpectedly increased in January as higher food costs more than made up for the plunge in energy.

The 0.1% gain in the producer-price index followed a 0.2% decline in December, Labor Department figures showed Feb. 17. Wholesale prices were down 0.2% from January 2015.

Inflation has been muted for much of the past few years, exacerbated recently by a continued drop in oil prices. As that decline stabilizes and the labor market strengthens, Federal Reserve policymakers are betting that inflation will drift closer toward their goal.

“Over the medium term, depending on how long you take that out, hitting the 2% target should be pretty achievable,” Brian Jones, senior U.S. economist at Societe Generale in New York, said before the report.

The median forecast of 63 economists surveyed by Bloomberg News called for a 0.2% month-over-month decrease in wholesale prices. Estimates in the survey ranged from a 0.7 drop to unchanged.

Food prices increased 1% last month, the biggest gain since May, after a 1.4% drop. Energy expenses declined 5% in January after a 3.5% drop the month before.

Wholesale prices excluding these two components climbed 0.4% in January from the month before, compared with the 0.1% increase seen by the median forecast of economists surveyed. It followed a 0.2% increase in December. Those costs were up 0.6% from January 2015.

Also eliminating trade services to arrive at a reading some economists prefer because it excludes one of the report’s most volatile components, wholesale costs rose 0.2% in January from a month earlier, the same as in December.

By Victoria Stilwell
Bloomberg News

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