Producer prices dip in December as oil prices subside

WASHINGTON – Wholesale prices paid to U.S. producers dipped a seasonally adjusted 0.1 percent last month as oil prices temporarily retreated from record levels, the U.S. Department of Labor’s Bureau of Labor Statistics reported today. The decline follows a 3.2-percent surge in November that was the largest increase of the past 34 years.
Analysts had expected the Producer Price Index to rise 0.2 percent in December from its level the month before, based on the median forecast from a Bloomberg News survey of 73 economists. (Their estimates ranged from a gain of 0.9 percent to a decline of 1.0 percent.)
Among PPI components, the index for finished energy goods fell 1.9 percent last month, after rising 14.1 percent in November. Producer prices for finished foods rose 1.3 percent, after holding steady the month before.
The core PPI excluding food and energy rose 0.2 percent in December, slowing from November’s 0.4-percent increase.
Compared with the final month of 2006, the PPI rose 6.3 percent to 170.6 points (1982 = 100), accelerating from the 1.1-percent increase seen in 2006. “This faster rate of increase … is attributable to food and energy prices,” the BLS said.
Energy goods surged 18.4 percent in 2007, after falling 2.0 percent the year before, while finished foods rose 7.4 percent, accelerating from 2006’s 1.7-percent year-over-year gain. But the core index excluding food and energy rose 2.0 percent last year, the same rate as in 2006.
“In the end, the Fed is going to put their inflation concerns on the back burner and focus on what they perceive as a more pressing problem – the weakness in the economy,” Michelle Girard, an economist at RBS Greenwich Capital in Greenwich, Conn., told Bloomberg News. “Looking beyond this year to 2009, when we think growth will be back above its long-term potential, the Fed could find itself with more of an inflation problem.”
Additional information, including the 20-page Producer Price Indexes report, is available from the U.S. Department of Labor’s Bureau of Labor Statistics at www.bls.gov/ppi.