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 The Labor Department said on Wednesday its seasonally adjusted
producer price index rose 0.4 percent last month, the biggest rise
since June, after slipping 0.1 percent in November.
Even with the latest rise, however, prices at the wholesale level
were up only 1.2 percent from a year-ago, suggesting a continued
lack of pressure on the prices consumers pay.
"We are still seeing very subdued inflation pressures. The type of
economic growth we see in 2014 is likely to lead to a slow
normalization in consumer prices, not a fast one," said Laura Rosner,
an economist at BNP Paribas in New York.
December's rise in prices received by the nation's farms, factories
and refineries ended two straight months of declines and matched
economists' expectations.
Wholesale prices excluding volatile food and energy costs increased
0.3 percent, the biggest gain since July 2012, after ticking up 0.1
percent the prior month.
However, tobacco accounted for nearly half the increase. Wholesale
tobacco prices typically rise in December.
Over the past 12 months, the core price index was up just 1.4
percent.
Despite an acceleration in economic activity in recent months,
inflation is well below the Federal Reserve's 2 percent target.
Economists say that is largely because a large amount of slack in
the labor market has kept wage gains under wraps.
The Fed in a separate report on Wednesday said the economy was
growing at a moderate pace and noted that prices largely remained
stable, though there had been some small increases.
While the central bank plans to bring its bond-buying stimulus to an
end this year, the lack of inflation should allow it to keep
interest rates near zero for even longer.
"There is no reason to expect much stiffening up of price gains this
year," said Michael Montgomery, a U.S. economist at IHS Global
Insight in Lexington, Massachusetts.
U.S. Treasury debt prices fell on the inflation data, which some
traders viewed as a sign of strength in the economy, while the
dollar rose against a basket of currencies. U.S. stocks pushed
higher, helped by strong bank earnings.
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ECONOMIC ACTIVITY PICKING UP
The economy gathered steam at the end of 2013, with solid increases
in consumer spending, even though a cold snap dampened job growth in
December. Some of that momentum appears to have spilled over into
the new year.
The New York Federal Reserve said its "Empire State" business
conditions index rose to 12.51 in January, the highest reading since
May 2012, from 2.22 in December. A number above zero indicates
expansion of factory activity in New York state.
Activity was boosted by a surge in new orders and a sharp
improvement in labor market conditions. The survey also showed
broad-based price gains in early January.
John Ryding, chief economist at RDQ Economics in New York, said the
report painted a "very encouraging picture" but cautioned that it
could be at odds with activity nationally.
In December, wholesale gasoline prices rose 2.2 percent, accounting
for more than half of the 1.6 percent increase in overall energy
prices.
Wholesale food prices fell 0.6 percent, held down by the biggest
drop in pineapple prices since May 2006. Pork prices also weighed,
dropping by the most since September 2012.
Tobacco prices rose 3.6 percent. Passenger car prices rose 0.2
percent and light truck prices advanced 0.5 percent, helping to lift
the core price gauge.
The government is revamping its producer prices report effective
with January's data and will for the first time cover service and
construction products. January's report will be released on February
19.
(Reporting by Lucia Mutikani; additional
reporting by Rodrigo Campos in New York; editing by Andrea Ricci)
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