US Producer Prices Surge in January, Pressure Federal Reserve to Raise Interest Rates
By US producer prices rose more than expected in January, underscoring persistent inflationary pressures that could push the Federal Reserve to pursue further interest-rate increases.[0]
The Labor Department said on Thursday that the Producer Price Index for final demand increased 0.7 percent in January, seasonally adjusted, higher than the 0.4 percent rise expected by economists surveyed by Dow Jones.[1] The index for final demand less foods, energy, and trade services rose 0.6 percent, the largest advance since last March.[2]
The core Producer Price Index (PPI) rose 0.5%, excluding food and energy, which was higher than the anticipated 0.3% increase.[3] Core excluding trade services rose 0.6%, surpassing the expected 0.2%.[2] Headline Producer Price Index (PPI) rose by 6% in the 12 months leading up to March 2022, which was lower than its peak of 11.6% earlier that same[4]
The cost of goods rose by 1.2%, the highest rate since seven months ago, with a 5% increase in energy prices leading the increase.[2] Gasoline prices saw a 6.2% increase, accounting for nearly a third of the total change in goods prices.[1] The cost of food decreased by 1%, particularly with fresh and dry vegetables decreasing by 35.5%.[5]
It has been suggested by economists that the January inflation rise is mainly due to some seasonal aspects in addition to the repayment of past months which had more subdued inflation levels.[6] The unusually high temperatures of winter may have had some influence, and fuel costs, which are changeable, also increased during the month.[6]
Markets expect the Federal Reserve to increase interest rates a few more times this year, according to CME Group data, with the final, or “terminal,” rate ending around a range of 5.25%-5.5%, from its current 4.5%-4.75%.[7] This moved stocks lower, with the Dow Jones Industrial Average falling 195 points to 33,933, while the S&P 500 eased 24 points at 4,123 and the tech-heavy Nasdaq lost 73 points to 11,998.[8]
Shopify Inc.'s shares dropped 16% after they announced that their first-quarter revenue projections were likely to be slightly lower than anticipated.[9] Shares of Cisco Systems Inc. (CSCO) rose over 4% in pre-market trading after announcing second-quarter revenue of $13.59 billion, surpassing the expected value of $13.43 billion, and increasing its full-year revenue outlook to a range between 9% and 10%.[9]
0. “US Producer Prices Exceed Forecast in Biggest Gain Since June” Bloomberg, 16 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-16/us-producer-prices-exceed-forecast-in-biggest-gain-since-june
1. “Higher Gasoline Prices Drive U.S. Producer Price Index Higher” OilPrice.com, 16 Feb. 2023, https://oilprice.com/Latest-Energy-News/World-News/Higher-Gasoline-Prices-Drive-US-Producer-Price-Index-Higher.html
2. “Producer Prices Rose 0.7% in January” Floor Focus, 16 Feb. 2023, https://www.floordaily.net/flooring-news/producer-prices-rose-07-in-january
3. “Producer prices rose in January but annual inflation continued to cool” CNN, 16 Feb. 2023, https://www.cnn.com/2023/02/16/economy/producer-price-index-ppi-inflation-january/index.html
4. “Producer price index January 2023:” CNBC, 16 Feb. 2023, https://www.cnbc.com/2023/02/16/producer-price-index-january-2023-.html
5. “Wholesale Inflation Rose More Than Expected in January” Investopedia, 16 Feb. 2023, https://www.investopedia.com/wholesale-inflation-rose-more-than-expected-in-january-2023-7110567
6. “Crypto Market Tumbles After U.S. PPI Data Comes At 6%” CoinGape, 16 Feb. 2023, https://coingape.com/crypto-market-tumbles-after-u-s-ppi-data-rises-0-7-in-january/
7. “U.S. stocks are falling after hotter-than-expected producer prices By Investing.com” Investing.com, 16 Feb. 2023, https://www.investing.com/news/stock-market-news/us-stocks-are-falling-after-hotter-than-expected-producer-prices-3005848
8. “S&P 500, Nasdaq, Dow lower on PPI data” Proactive Investors USA, 16 Feb. 2023, https://www.proactiveinvestors.com/companies/news/1006414/s-p-500-nasdaq-dow-lower-on-ppi-data-1006414.html
9. “Markets Today: Stock Index Futures Tumble as U.S. Jan PPI Exceeds Forecasts” Barchart, 16 Feb. 2023, https://www.barchart.com/story/news/14268583/markets-today-stock-index-futures-tumble-as-u-s-jan-ppi-exceeds-forecasts
