The Bureau of Labor Statistics reported that producer prices rose 0.2 percent in January, the first increase since September. With that said, inflationary pressures remain modest, with core finished goods prices up just 1.8 percent over the past year. This is below the 2 percent goal stated by the Federal Reserve Board, and it reflects significant easing over the course of 2012, as described last month and as can be seen in the attached graphic.
More specifically, in January, energy costs continued to fall, down 0.4 percent for the month. Prices for finished energy goods – mostly from gasoline – have declined for four straight months, helping to lowering inflationary pressures. Food costs rose 0.7 percent in January, reversing the 0.8 percent increase in December. The largest contributor to this gain was higher vegetable prices. Outside of energy and food costs, other increases were found in the pharmaceutical sector and with some types of capital equipment.
A similar picture emerges for the manufacturing sector, which has experienced only a 0.7 percent increase in producer prices year-over-year. This is largely due to reduced energy costs, with raw materials for petroleum and coal products manufacturers down 4.4 percent since January 2012. Nonetheless, these costs were 0.9 percent higher in January on crude petroleum prices.
In January, manufacturers observed a 0.3 percent gain in raw material costs. Other sectors with higher costs for the month include paper manufacturing (up 2.1 percent), chemical manufacturing (up 0.9 percent), leather and allied products (up 0.9 percent), textile products mills (up 0.8 percent), and textile mills (up 0.7 percent). There were two manufacturing sectors with declining costs in January: beverage and tobacco (down 0.8 percent) and apparel (down 0.1 percent).
Chad Moutray is chief economist, National Association of Manufacturers.