U.S. producer prices increase moderately in December

U.S. producer prices rose moderately in December, suggesting that an anticipated pick up in inflation in the coming months will probably not be worrisome.

The producer price index for final demand increased 0.3% last month after nudging up 0.1% in November, the Labor Department said on Friday. In the 12 months through December, the PPI rose 0.8%, matching November’s gain.

A 1.1% increase in the cost of goods accounted for last month’s rise in the PPI. Prices for services dipped 0.1%.

Economists polled by Reuters had forecast the PPI rising 0.4% in December and gaining 0.8% on a year-on-year basis.

The government this week reported solid increases in both consumer and import prices in December. Economists expect inflation to accelerate in the months ahead as the government provides more money to stimulate the economy, and weak prices early in the coronavirus crisis fall out of the calculations.

But any inflation spark will probably be temporary against the backdrop of ample slack in the labor market, with at least 18.4 million Americans on unemployment benefits.

The Federal Reserve has signaled it would tolerate higher prices after inflation persistently undershot the U.S. central bank’s 2% target.

Excluding the volatile food, energy and trade services components, producer prices increased 0.4%. The so-called core PPI inched up 0.1% in November. In the 12 months through November, the core PPI gained 1.1% after rising 0.9% in November.

Energy prices jumped 5.5% last month after advancing 1.2% in November. Wholesale food prices slipped 0.1%. Core goods prices increased 0.5%. Margins for final demand trade services, which measure changes in margins received by wholesalers and retailers, dropped 0.8%. Healthcare costs edged up 0.1%, while portfolio fees jumped 1.7%.

Those healthcare and portfolio management costs feed into the core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure.