Producer Prices Show Some Life In January

Producer prices showed life in January, at least outside of energy. Overall, producer prices inched 0.1 percent higher, low but 3 tenths above the Econoday consensus, with the ex-food and energy reading at a much stronger-than-expected 0.4 percent. Services are a plus in the report, excluding which and also excluding food and energy, prices rose an as-expected 0.2 percent.

Service prices rose a very solid 0.5 percent with the year-on-year rate at plus 0.9 percent. Compared to other year-on-year rates, this is very solid and compares with minus 0.2 percent overall.

The service sector is the center of the economy's strength and today's report, though modest, is pointing in the right direction for FOMC policy makers who are targeting a 2 percent inflation goal.

Recent History Of This Indicator:
Pulled down by extending declines for oil and commodities, the headline for December's producer prices report is expected to slip 0.2 percent for a second straight month. Excluding gasoline and food, the core rate is expected to show less weakness, at a consensus plus 0.1 percent gain. Service readings in this report, little changed in the December report, failed to offset commodity weakness. Year-on-year, producer prices were down 1.0 percent in December with the core rate up but only marginally at plus 0.3 percent.