January 11, 2018 12:30 PM, EST

Wholesale Prices Unexpectedly Show First Drop Since 2016


U.S. wholesale prices fell in December for the first time in more than a year on declining costs for services, a potential sign that inflation pressures are easing in the economy, a Labor Department report showed Jan. 11.

Highlights of Producer Prices for December

• Producer-price index fell 0.1% month over month (estimated 0.2% rise) after 0.4% gain the previous month; first decline since Aug. 2016.

• PPI rose 2.6% from a year earlier (estimated 3%) after 3.1% gain in prior 12-month period.

• Excluding food and energy, core gauge fell 0.1% month over month (estimated 0.2% rise); rose 2.3% year over year.

Key Takeaways

Most of the monthly drop in the PPI reflected a 0.2% decline in the cost of services, while goods prices were unchanged. A drop in the index for automotive fuel retailing was a major driver, along with falls in costs for loan services, airline passenger services and apparel retailing.

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The PPI excluding food, energy, and trade services, a measure some economists prefer because it strips out the most volatile components, rose 2.3% from December 2016 following a 2.4% gain.

With inflation still below the Federal Reserve’s target, the PPI report is likely to put additional focus on Labor Department figures due Jan. 12 for consumer prices. That will give a better indication of where inflation is headed and how it will factor into the central bank’s deliberations over how fast to raise interest rates in 2018.

Other Details

• Excluding the volatile categories of food, energy, and trade services, producer costs rose 0.1% from the previous month following a 0.4% increase.

• Energy prices unchanged from the prior month; food costs fell 0.7%.

• Retail margins for automotive fuels and lubricants fell 10.7%; airline passenger services were down 4.3%, the most since February 2009.

With assistance by Chris Middleton