The Producer Price Index (PPI), which assesses wholesale price changes, increased by 0.4% in January from December, surpassing expectations, while the annual rate held steady at 3.5%. Excluding the volatile food and energy sectors, the Core PPI rose by 0.3% month-over-month, with the year-over-year rate slightly declining from 3.7% to 3.6%. Notably, December’s figures were revised upwards.
What’s the bottom line? PPI data is vital, as it influences the Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred measure of inflation. Although the overall PPI was stronger than anticipated, a closer examination reveals declines in significant components such as healthcare and airline passenger services that affect PCE. This could indicate a more favorable PCE report set to be released on February 28, which would be positive news following the higher-than-expected Consumer Price Index (CPI).