New: Producer price index rises 0.7% in January, 6% year-on-year

The Producer Price Index for final demand increased 0.7 percent in January, seasonally adjusted, the
U.S. Bureau of Labor Statistics reported today. Final demand prices declined 0.2 percent in December 2022 and advanced 0.3 percent in November. (See table A.) On an unadjusted basis, the index for final demand rose 6.0 percent for the 12 months ended January 2023.

In January, a 1.2-percent rise in prices for final demand goods led the advance in the final demand index. Prices for final demand services also moved higher, increasing 0.4 percent.

The index for final demand less foods, energy, and trade services rose 0.6 percent in January 2023, the largest advance since moving up 0.9 percent in March 2022. For the 12 months ended in January 2023, prices for final demand less foods, energy, and trade services increased 4.5 percent.

[This is also going in the wrong direction, although perhaps not as notably as CPI in January. It dovetails with the retail sales report’s big jump in consumer spending last month, which indicates that the Fed’s moves aren’t doing enough to kill demand and corral runaway inflation. The PCE Index report will come out next week, and at that point we may see the Fed signal a return to a more aggressive strategy. At any rate, it’s clear from these two reports that inflation is not under control as Joe Biden claims, and that means a recession is more likely to happen while the Fed remains the only institution focused on fighting it. — Ed]