The Bureau of Labor Statistics said that producer prices for final demand goods and services inched down 0.1 percent in December, declining for the first time since August 2016. For manufacturers, producer prices for final demand goods were unchanged in December, pausing after jumping 1.0 percent in November. More than anything, this reflected flatness in energy prices, which had increased by 4.6 percent in the prior report. This was largely consistent with recent observations in the spot price for West Texas intermediate (WTI) crude oil, which increased from an average of $51.58 in October to $56.64 in November to $57.88 in December. (Note that WTI prices have increased significantly since then, with a spot price of $64.45 this morning.)
Meanwhile, food prices were off by 0.7 percent in December. On a year-over-year basis, final demand food and energy costs have risen 1.9 percent and 10.3 percent, respectively. Excluding food and energy, producer prices for final demand goods were up by 0.2 percent in December, increasing for the fifth consecutive month.
Overall, producer prices for final demand goods and services have increased 2.7 percent since December 2016, down from a 3.0 percent year-over-year pace in November. This reflects an acceleration in pricing pressures over the course of 2017, up from a 1.6 percent year-over-year rate twelve months ago. Nonetheless, core producer prices – which exclude food, energy and trade services – continue to be modest at 2.2 percent, off from 2.4 percent in the prior release. For comparison purposes, core producer prices were 1.9 percent year-over-year in December 2016, with that rate averaging 2.0 percent for 2017 overall.