For the month of January alone, prices rose 1%, adjusted for seasonal swings, dwarfing both the price increase from December and economists’ expectations. Forecasts had only been for a 0.5% price increase.
Stripping out food, energy and trade services, which tend to have more volatile price swings, the inflation gauge rose 0.9% in January, the biggest jump since January 2021. Over the 12-month period, core prices rose 6.9%, a 0.1 percentage point decline compared with December.
Economists are hopeful that America will see pandemic inflation reach its peak in the first months of 2022. It’s not clear yet whether this peak was reached in January or if it’s still to come.
Where did prices rise?
The PPI tracks prices for finished goods and services sold to consumers, as well as the goods, services, maintenance and repair construction sold to businesses that make or provide those finished products.
In January, prices rose across the board, including for motor vehicles and equipment, gas, clothing and accessories, transportation and hospital outpatient care.
Last month’s increase in energy costs won’t get any better in February, said BMO senior economist Jennifer Lee in a note to clients.
On Monday, US oil prices briefly rose to their highest level since 2014 amid heightened concerns about a potential Russian invasion of Ukraine.
And even though oil prices fell early Tuesday, good inflation-related news is hard to come by.
“An early look at February in one part of the country isn’t bringing good news,” Lee said, referring to the New York state manufacturing index that was released at the same time as PPI and sharply underperformed expectations.
“The President will continue to make progress on his three-part plan of addressing supply chain disruptions; lowering kitchen tables costs with his Build Back Better agenda; and promoting more competition,” a White House official told CNN Business Tuesday.
For the Federal Reserve, which is tasked with keeping prices stable, Tuesday’s report just reiterated that inflation is running too hot and that it’s time to adjust monetary policy.
