The Bureau of Labor Statistics (BLS) announced that producer prices rose 0.4 percent in February, an uptick from the 0.1 percent growth observed in January. This represents the fastest pace since September. The largest driver of this increase was the boost in energy costs, up 1.3 percent, with gasoline prices rising 4.3 percent. Clearly signaling why manufacturers are strongly pushing for an “All of the above” energy strategy.
On the other hand, food costs were 0.1 percent lower. Core inflation — which excludes food and energy costs — was 0.2 percent higher, or 3.3 percent year-over-year. The larger trend has been an easing of raw material and energy costs over the past few months, so this month’s numbers suggest a reversal of that, with a slight acceleration of both. As a sign of this, intermediate and crude goods costs rose 0.7 percent and 0.4 percent, respectively.
For manufacturers, raw materials were 0.6 percent higher in February, with a 4.8 percent increase in costs since February 2011. Manufacturing sectors with the greatest monthly cost increases include petroleum and coal products (up 2.3 percent), primary metals (up 1.8 percent), wood products (up 1.7 percent) and chemicals (up 1.1 percent). Only two sectors experienced lower costs in February: textile mills (down 0.7 percent) and transportation equipment (down 0.1 percent).
Today’s release was mostly in-line with consensus estimates, given the recent run-up in energy costs. BLS will release data on the consumer price index tomorrow, which should find a similar acceleration in costs.
Chad Moutray is chief economist, National Association of Manufacturers.