Producer prices rose slightly in December, a positive sign for inflation
The consumer price index, a much-anticipated measure of inflation, comes in Wednesday. It’ll tell us how prices paid by consumers changed in December. The producer price index, though, is already out, and it showed positive signs for the direction of inflation.
Prices at the wholesale level rose just 0.2% last month from the prior month, and they were flat with food and energy stripped out. But along the supply chain, prices may still be rising.
Quick refresher: The PPI measures, in part, how much retailers pay for goods and services.
“So if you make nails and you sell nails to Home Depot, this index is about the price at which you’re selling the nails to Home Depot, not the price at which Home Depot is selling the nails to you when you go to the store,” said Leah Brooks, an economist and professor at George Washington University.
So the PPI shows the nail makers of this economy — and other producers, overall — didn’t raise their prices much in December. Because those prices influence how much consumers pay, that’s generally good news for the Federal Reserve’s long fight to bring inflation down, Brooks said.
“Maybe the best way to think of it is that we’re not out of the woods, but we’re near the edge of the woods,” she said.
We’re not quite out because inflation overall is still a bit higher than the Fed would like it to be. And, there are pressure points ahead that could keep us in the woods for a while longer.
Transportation and warehousing costs, for example, both ticked up 2.2% in December.
Zac Rogers, a professor of management at Colorado State University, said that may be because after years of having extra space, trucks got a bit fuller toward the end of the year.
“Because of that, we are seeing carriers able to increase prices more than they had been over the last couple of years,” he said.
And in warehousing, “anecdotally … a lot of people are pulling inventory forward, it seems like, in order to avoid any potential tariffs with the incoming administration,” Rogers said.
Loading up on inventory, he said, soaks up available warehouse space, which means potentially higher prices for that space.
Other policies associated with President-elect Donald Trump’s administration could also affect prices, said Deni Koenhemsi, head of economic analysis at Morning Consult.
“Deporting undocumented workers, as well as tax-rate cuts, all will have an effect on inflation down the line,” she said.
One of the first places those effects may show up is in the producer price index.