US producer prices rise more quickly than expected in January

Wholesale prices in the US rose more quickly than expected at the start of 2023.

According to the Department of Labor, so-called final demand prices increased at a month-on-month pace of 0.7%.

That was faster than the consensus forecast for a rise of 0.4% as per a poll of economists conducted by Dow Jones Newswires.

In comparison to one year before, producer price gains slowed from 6.5% to 6.0%.

At the core level, producer prices were up by 0.5% over the month (consensus: 0.3%).

Final demand prices for goods bounced back by 1.2% over the month, following a 1.4% drop in December.

Within that, food prices declined by 0.9%, those for energy by 6.7% and excluding food and energy prices were up by 0.1%.

Final demand services prices meanwhile increased again by 0.4% on the month, driven by a 0.8% rise in those for trade, which include retailers' margins.

Transportations and warehousing prices meanwhile were up by just 0.2% and those of 'other' final demand services by 0.6%.

Commenting on the latest figures, Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted that February's drop more than reversed the previous month's plunge, taking it to its lowest level since May 2020.

However, part of the decline in the headline index was the result of another drop in the sub-index for delivery times, from -5.6 to -13.6, which was in fact a good thing as it reflected a continuing improvement in supply conditions.

"The drop in the Philly index contrasts starkly with the huge jump in the Empire State index, released yesterday; the lesson here is that no regional survey is definitive evidence of anything [...]

"We continue to expect an improvement in the manufacturing survey data, as the lagged effect of the rebound in China’s manufacturing PMIs [...] works its way through to the U.S. surveys."