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First Cut: January Final-Demand PPI indicates little upward price pressure outside of trade services

The January Final-Demand Producer Price Index (PPI) edged down 0.1% overall month-over-month, but was up 0.2% excluding food, energy, and trade. The components for foods fell 1.7% and energy was down 3.8%. Excluding food and energy, final demand goods were up 0.3%. Final demand services were up 0.3 with trade services rising 0.8%.

For trade of finished goods, prices were up 0.8%, with trade of personal consumption goods up 0.9% while trade of private capital equipment was up 0.2%.  Government purchase trade goods were up 0.9%, with government purchased goods excluding capital equipment up 1.3%. Trade of export prices were up 1.2%. Prices of trade for goods and services were up significantly at year-end, possibly in a bid to avoid even higher tariff costs in January.

The FOMC pays attention to the PPI, but it is not at the top of the list in gauging inflation conditions and price stability. However, the year-over-year index at 2.0% matches the Fed’s 2% symmetric objective. That the core index is up 2.5% may be a bit higher than might be deemed comfortable, but much of that can be attributable to special factors like the impact of tariff pricing.

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