Wholesale prices surged nearly 10% last year — their biggest increase in more than a decade — but notched a smaller-than-expected gain during the final month, sparking hopes that the worst of inflation could be behind the US economy.
The Department of Labor said that the producer price index rose by 0.2% last month compared to November. Wall Street analysts expected the PPI to rise by 0.4%.
For the 2021 calendar year, however, the index finished 9.7% higher. It is the largest increase in a 12-month period since 2010.
Excluding food and energy prices, the “core” PPI increased 0.4% for the month – just shy of the 0.5% estimate, according to CNBC.
In November, the PPI rose by 1% – up from 0.6% the previous month.
Final-demand prices for food and energy both dropped in December by 0.6% and 3.3% respectively. Trade prices were up 0.8% while transportation and warehousing costs rose by 1.7%.
Goods prices fell by 0.4%, but the price of services jumped by 0.5%.
Analysts said that the red-hot demand for goods during the pandemic has been the key factor driving inflation.
The PPI is a key economic indicator that is used to calculate real growth by adjusting revenue sources for inflation.
It evaluates the output of US-based producers in industries such as manufacturing, agriculture, natural gas, electricity, and scrap materials.
The consumer price index, which measures the average prices paid by consumers for goods, rose 0.5% in December. Overall, inflation rose by a whopping 7% in 2021 – the highest in 40 years.
The rapidly rising prices of goods could compel the Federal Reserve to begin raising interest rates as soon as March.
The 0.2% increase in PPI month-over-month does offer a glimmer of hope that the pace of inflation could be cooling.
The Department of Labor also released data showing that there were 230,000 initial jobless claims filed for the week ending on Jan. 8 – up from the previous week’s figure of 207,000 claims.
The jobless claims number was higher than expected andits highest since November.
Economists had projected 200,000 initial jobless claims for the week.
The four-week moving average of jobless claims was 210,750, up 6,250 from the previous week’s average of 204,500. The moving average addresses volatility in the weekly numbers.
The economy’s recovery has been hampered by the rapidly spreading Omicron variant, which has fueled rising COVID-19 case counts and hospitalizations.
But there does appear to be some good news for the economy.
Approximately 1.56 million Americans were claiming continuing unemployment benefits for the week ending on Jan. 1 – – the lowest level since June 1973.
That was a decrease of 194,000 compared to the previous week.
The unemployment rate for December fell to 3.9%, though that has been little comfort as analysts continue to show concern for the record levels of inflation.
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