US Producer, Consumer Price Indexes Rise In February

The U.S. Producer Price Index (PPI), which tracks final demand for products and services, rose 0.1 percent in February representing a modest deceleration and estimate miss, according to the Bureau of Labor Statistics.

Meanwhile, rising costs of food, gas and rent drove a 0.2-percent rise in the Consumer Price Index (CPI). The modest pace of increase broke a three-month streak of CPI stability and yielded the smallest year-over-year gain (1.5 percent) since 2016.

How PPI Changed

Driven by a 1.8-percent rise in energy prices, final demand for goods surged 0.4 percent after three consecutive monthly drops. The PPI’s food component fell 0.3 percent.

Service prices remained unchanged. Higher prices for traveler accommodation (up 5.3 percent), machinery and equipment, food retailing, legal services and portfolio management offset declines in nonresidential real estate, health and beauty, airline services, apparel and accessories, and fuels and lubricants retailing.

Core PPI rose 2.5-percent year-over-year against a 2.6-percent precedent and estimate.

How CPI Changed

Contributing to the rise in CPI, gas prices popped 1.5 percent following a 5.5-percent drop in January. Food recorded its largest jump since May 2014 with a 0.4-percent rise. Rent remained consistent (0.3 percent), healthcare fell 0.2-percent after January’s 0.2-percent increase, and apparel decelerated from 1.1-percent to 0.3-percent growth.

Car insurance, plane tickets and personal care products also grew more expensive, while new vehicles, recreation, and used cars and trucks declined.

The core CPI, which excludes the volatile food and energy factors, decelerated from a consistent 0.2-percent rise to 0.1 percent in February. Economists had forecasted steady rates.

February’s costs coincide with 3.4-percent annual wage growth, representing the largest jump since spring 2009.

Why It’s Important

Market pricing signals the direction of the Federal Reserve’s monetary policy. However, the Fed uses neither of the above indices as its guide. It instead refers to the personal consumption expenditures (PCE) index, whose January data will be release March 19.

The market shouldn’t necessarily anticipate a sharp reaction, though. The Fed is in no rush to adjust monetary policy, as Chairman Jerome Powell reiterated a “wait and see” approach on Sunday.

March CPI data will be release April 10, and PPI data will be reported April 11.

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Posted In: Bureau of Labor StatisticsCPIPPINewsEcon #sEconomicsPre-Market Outlook