January 13, 2022 | 08:55
U.S. PPI Cools ... A Little
The four-decade high consumer price inflation report justified Fed Chair Powell's tone this week, along with the parade of Fed officials who all threw their support behind a March hike using words/phrases such as "I'm very open" or "I'm totally open" to it, or it is "conceivable". And until supply chains are unclogged (lowering prices), and more workers make their way back to the workforce (easing wage pressures), inflation will remain elevated at around these levels.
Earlier in the chain of events, prices continued to climb for producers, but it was not as bad as many feared. U.S. producer price inflation rose 0.2% in December, which is the mildest increase since November 2020. And considering that the average monthly increase over the past 12 months was 0.8%; well, 0.2% is good news. It was all due to a 0.4% drop in goods (first since April 2020), but there is still pressure in services (+0.5%) and construction (+0.3%). Excluding food & energy, core PPI rose 0.5%, also meeting consensus expectations and about half of the prior month's pace.
Things are still very heated compared to a year ago, though. Headline PPI soared 9.7% y/y, the highest since records began using this methodology, while core PPI surged 8.3% y/y.
Businesses are still facing hurdles on the labor market front, too. U.S. initial claims rose an above-expected 23k in the first week of January to a 2-month high of 230k. That is the second increase in a row, and the most since late November. Continuing claims, however, took a big 194k step back in the week to January 1 to 1,559k, the lowest since mid-1973. Blame the increase in first-time claimants on the Omicron (Are schools going back online? How long? Who will watch my kids? I am unwell... I need to stay home for 5-10 days).
Not good news, obviously but at least we're no longer talking about the # of claimants in the millions anymore.