An index that measures wholesale prices rose less than expected in December, increasing by a seasonally adjusted rate of 0.2%, according to the U.S. Bureau of Labor Statistics.
The producer price index, which measures the average change in prices received by domestic producers of goods, energy and services that are sold for personal consumption, showed that inflation was half of median forecasts of 0.4%.
The lower prices are considered encouraging signs that inflation may still be in check and bode well for Wednesday’s release of the consumer price index (CPI) for December and all of 2024. The CPI is one of the inflation gauges preferred by the Federal Reserve, which is expected to cut interest rates by 50 basis points this year, if inflation continues to drop.
The index, with food, energy and trade services stripped out, rose a mere 0.1%, the same increase seen in November. Prices for final demand without energy, food and trade services rose 3.3% in 2024, higher than 2023’s 2.7%.
The main culprit for the December price increases was a 3.5% jump in final demand energy, which included a 9.7% increase in gas prices. Rising 2.2% was transportation and warehousing costs, which included a 7.2% jump in passenger transportation. Prices for final demand food fell 0.1% in December after rising 2.9% in November.
Prices for residential electric power, meats, motor vehicles, fresh fruits and melons also rose. The prices for fresh and dry vegetables fell a whopping 14.7%. Prices for carbon steel scrap and for residual fuels also fell. The index for final demand services was unchanged after rising 0.3% in November.
