Producer Prices Jump, Could Trickle Down to Consumers

Producing Cheese
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The price businesses receive for the goods and services they make jumped in January, showing the largest monthly increase since the government started tracking 12 years ago, according to one measure. It may be a sign that consumers will start seeing higher prices at the register.

The producer price index (PPI) jumped 1.3% in January on a seasonally adjusted basis, compared to a 0.3% rise in December and triple analysts’ mean estimate for a 0.4% gain. It's the biggest gain since at least 2009, when the data started being tracked. Separately, another measure that excludes the volatile food and energy sectors rose 1.2%, which was the largest increase for that figure since it was introduced in Sept. 2013, the U.S. Bureau of Labor Statistics said Wednesday.

Supply-chain disruptions and higher energy costs helped push producer prices higher, economists said. Nonetheless, Federal Reserve Chairman Jerome Powell has repeatedly said he isn’t worried about inflation soaring to untenable highs that could hurt the economy, and economists generally don't see the price increases as motive for the central bank to raise interest rates any time soon.

The jump in producer prices is likely transitory. Supply-chain issues should moderate with further reopening of the economy and fiscal legislation—such as extensions of the foreclosure moratorium and rolled back tariffs—should ease price pressures later this year, Ryan Sweet, an economist at Moody’s Analytics, wrote in a research report. 

"Still, there could be some pass through from higher producer prices onto the consumer,” he said.