US producer price surges 0.2% in December, miss analysts estimates

• The PPI move to 9.7 % in 2021, the biggest gain since 2010

• The PPI for final demand climbs 0.2 % last month

Producer prices in the United States increased in December as inflation rise continues to pressure businesses to pass on higher costs to consumers and supply constraints persist.

According to the Labor Department, the producer price index for final demand climbed 0.2 % last month. In December, the advance in the final demand index can be traced to a 0.5-% increase in prices for final demand services.

Economists polled by The Wall Street Journal anticipate PPI up by 0.4% for the month. 

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The PPI moved up 9.7 % in 2021, the largest calendar-year increase since data were first calculated in 2010. 

Higher commodity prices and higher labor expenses as a result of a labor shortage are driving up factory-gate inflation. Due to supply chain difficulties during the ongoing pandemic, manufacturers simply pass on the higher costs to consumers.

Excluding food, energy, and trade, core PPI gained 0.4 % for the month, falling short of the 0.5 % projection.

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Food and energy final-demand prices declined 0.6 % and 3.3 %, respectively, during the month. Trade prices increased by 0.8 %, while transportation and storage expenses increased by 1.7 %.

Final demand services increased by 0.5 % for the month, prices for final demand services less trade, transportation, and warehousing, and final demand transportation and warehousing services rose 0.2 % and 1.7 %, respectively.

The indexes for airline passenger services, food retailing, machinery and vehicle wholesaling, machinery and equipment parts also moved higher. In contrast, margins for automobile and automobile parts retailing decreased 2.7 %. The indexes for deposit services (partial) and health, beauty, and optical goods retailing also declined. 

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A major factor in the December decrease in prices for final demand goods was the index for gasoline, which moved down 6.1 %. Prices for meats, gas fuels, fresh and dry vegetables, diesel fuel, and primary basic organic chemicals also declined. In contrast, the index for ethanol increased 6.4 %. Prices for residential electric power moved higher. 

Consumer Price Index 

The consumer price index rose 0.5 % in December after rising 0.8 % in November, according to the Labor Department on Wednesday. 

The CPI increased by 7.0 % in the year to December. This was the largest year-on-year gain since June 1982, and it came on the heels of a 6.8 % increase in November.

Read more: U.S. employment rate rises slowly in December amid labor shortage

The so-called core price index, which excludes food and energy, increased 5.5 % year on year in December. This was a substantial increase than the 4.9 % increase in November, and it was the highest rate since 1991.

Picture Credits: USAToday