The latest Producer Price Index report from the U.S. Department of Labor doesn’t bode well for overall inflation, but the January PPI data did provide some hope for easing food prices.
The PPI, which measures the prices received by suppliers for domestically produced goods, was up 6% for the full year and 0.7% over December levels. However, prices for finished food products were down 1% in January. Analysts often see the PPI as a precursor to price changes in the consumer market.
While the PPI found that prices for finished food products were up 11.6% on a yearly basis, the monthly decrease was the largest in more than a year. Among the foods showing the sharpest producer price declines from December to January were:
• Fresh and dry vegetables, down 33.5%
• Fresh eggs, down 12.7%, and
• Processed young chickens, down 2.2%.
Food products showing the largest producer price increases included:
• Pasta products, up 10.6%
• Soft drinks, up 7.8%
• Beef and veal, up 7.6%, and
• Fresh fruits and melons, up 6.5%.
Some analysts said the 1% decline in the PPI for food is a hopeful sign for slowing consumer food-price inflation going forward. The Consumer Price Index for food at home was up 11.3% for the 12 months through January and showed a 0.5% increase monthly vs. December 2022.
Overall, the PPI for final demand goods was up 1.2% on a monthly basis in January, the largest increase since rising 2.1% in June 2022. Most of the January increase was attributable to a 5% jump in prices for final demand energy.
The prospect for ongoing price inflation could indicate that the Federal Reserve will be less likely to scale back on its plan to raise interest rates, which have the result of raising costs for borrowers and are intended to cool the economy and slow the rate of inflation.
