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Economics Gazette

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November 17, 2019

US production prices returned to growth

US production pricesProducer prices for US final demand rose in January with 0.4% mom, following the expectations on the market. The increase is due to higher fuel and health costs. The service prices reported a 0.3% growth in January, as the commodities rising by 0.7%. The main producer prices (excluding energy and food prices) rose by 0.4% in January, assuming an increase of 0.2%, marking the strongest increase since April 2017, when the upward movement with 0.5%.

The consumer prices in the US rose by 2.1% yoy in January, keeping their level in December, but the growth is above market expectations of growth of 1.9% and above the target of 2% of the Federal Reserve.

Today’s PPI data suggests that consumer price index (CPI) has also begun to gain momentum, as confirmed by the report of the Labor Ministry, according to which the consumer price index rose in January by as much as 0.5% on a monthly basis and 2.1% year on year.

The data highlights the rise in inflationary pressures in the world’s leading economy after a long period of very low inflation. They also seem to be a prerequisite for a more aggressive-than-expected policy of tightening, which means raising Fed interest rates this year.

Meanwhile, the Philadelphia Fed Manufacturing index, which is an important indicator of US manufacturing activity, jumped by 3.6 points to 25.8 points in February, which is above analysts’ expectations of 21.1 points. The index, measuring new orders, posted a 14.4 point rise to 24.5 points. The employment index also increased by 8.4 points to 25.2 points.

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