According to data released by the U.S. Department of Labor on Wednesday (18th), the producer price index (PPI) increased by 6.2% in December last year, the smallest increase since March 2021, lower than market expectations of 6.8% and the revised previous value of 7.3 %; after excluding volatile food and energy, the core PPI rose 5.5% in December last year, lower than market expectations of 5.7% and the previous value of 6.2%. Data showed that inflation in the United States is fading, which may allow the Federal Reserve (Fed) to slow down the pace of future interest rate hikes.
On a monthly basis, the U.S. PPI reported -0.5% in December last year, far below market expectations of -0.1%, and the revised value was 0.2%. Back-for-front value is 0.2%.
Observing the details of the index, the commodity price index fell by 1.6% in December last year, the largest drop since the 1.8% drop in July last year, mainly due to a 13.4% drop in gasoline prices, of which the final energy price index fell by 7.9%, and the food price index fell by 1.2% %.
Final service prices edged up 0.1 percent in December after rising 0.2 percent in November. Margins climbed in trade services, led by a 17.6% rise in fuels and lubricants retail margins.
Elsewhere, price indices for deposit services, airline passenger services, hospital care, and professional and business equipment wholesale moved higher, while trade, transportation, and warehousing prices were unchanged. In contrast, truck freight prices slipped 1.7 percent, while indices for real estate loans, machinery and vehicle wholesale, and room leasing also declined.
It is worth mentioning that with the further easing of intermediate product inflation, PPI inflation has also cooled, and the increase in the US consumer price index has been higher than that of PPI for the first time since December 2020.
Still, the Fed’s task of fighting inflation is far from over. The dollar has weakened recently, making U.S.-produced goods more competitive. On the other hand, a tight labor market combined with resilient consumer demand for services could keep inflation above the Fed’s target.
According to interest rate futures prices, the market predicts that the Fed will raise interest rates by 1 yard (25 basis points) at the next monetary policy meeting, further slowing down the pace of interest rate hikes.