Producer Price Report Soft

The fall in the price of oil is only one reason behind a 0.2 percent headline decline in producer prices as core readings are also soft, at minus 0.1 percent for ex-food and energy and unchanged excluding food, energy and trade services.

Energy fell 5.4 percent in December following a 5.0 percent drop in November. Yet the ongoing rebound in the price of oil points to a rebound in the next report for January. Whether this will help producer prices, however, is uncertain given general weakness in other readings including a 0.1 percent dip for total services and a 0.3 percent decline in trade services which track prices in the retail and wholesale sectors.

Indications at the consumer level are also soft with personal consumption down 0.2 percent and finished consumer goods falling 0.6 percent following a 1.1 percent drop in November.

This report, like last week's consumer price data, is not pointing to building pressures in demand or for prices and does not point to any urgency for Federal Reserve rate hikes.