Wholesale inflation fell unexpectedly in February, indicating that persistently high consumer prices are loosening their stronghold on the US economy.
According to the Labor Department, the producer price index, which monitors inflation at the wholesale level before it reaches consumers, decreased by 0.1% in February compared to the previous month. Prices are up 4.6% year on year, slightly below the 5.7% increase reported in January.
Producer Price Index (PPI) Fell Drastically
Refinitiv polled economists predicted that the 12-month rise in wholesale prices would slow to 5.4%.
Taking away the volatile food and energy components, core PPI fell sharply: annual price rises fell to 4.4%, and the index remained steady from the previous month (0% growth). These are lower than the downwardly revised 5% yearly price increase and 0.1% monthly increase in January.
According to Bureau of Labor Statistics statistics, a 0.2% reduction in final demand goods, which had soared 1.2% in January, contributed to the headline PPI decline. The final demand services index fell 0.1%, with trade falling 0.8% and transportation and warehousing falling -1.1%.
Final demand for foods fell 2.2%, with egg prices falling 41.3% month over month. Fresh eggs are presently up 38.2% for the year ending in February, a significant decrease from the record-high yearly gain of 244% in November 2022.
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Consumer Price Index Decreased
Separate Commerce Department data issued Wednesday indicated a 0.4% decrease in retail sales in February compared to the previous month. Consumer prices have fallen, but slowly.
The latest Consumer Price Index, issued on Tuesday, indicated that prices rose 6% in the year ending in February. The headline CPI was 6.4% in January.
The Fed has been on a year-long tightening campaign to bring down historically high inflation. But, the Fed’s approach has become more challenging as a result of the recent collapse of Silicon Valley Bank and the banking sector disquiet.
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