U.S. Producer Prices Rise Less Than Estimated as Virus Rages

(Bloomberg) -- Prices paid to U.S. producers rose less than expected in December as the pandemic continued to limit pricing power at the end of 2020.

The producer price index for final demand climbed 0.3% from a month earlier after a 0.1% gain in November, Labor Department figures showed Friday. The figure was below the median estimate of 0.4% in a Bloomberg survey of economists. The PPI advanced 0.8% from a year earlier.

Excluding volatile food and energy components, the so-called core PPI increased 0.1% from a month earlier, missing estimates, and was up 1.2% from a year earlier.

While the consumer price index -- out earlier this week -- is generally considered a more important indicator of inflation, producer prices can offer a glimpse into how price pressures will filter through to consumers.

While producer inflation accelerated from the prior month, the gain was largely driven by an increase in energy. Broadly, price pressures remain subdued and the Federal Reserve is expected to keep interest rates near zero for the foreseeable future without sparking a jump in inflation. While Covid-19’s resurgence is weighing on the economy and demand, widespread vaccinations and further fiscal stimulus should support prices in the future.

Producer prices excluding food, energy, and trade services -- a measure preferred by economists because it strips out the most volatile components -- rose 0.4% in December from the prior month, which was more than expected. They climbed 1.1% from December 2019.

The cost of goods climbed 1.1%, the biggest advance since May. Almost half of that increase was driven by climbing gasoline prices. Excluding food and fuel, goods prices rose 0.5%.

The cost of services, which make up about two-thirds of the overall PPI, fell for the first time since April, decreasing 0.1%.

(Updates with food, energy, and trade services in sixth paragraph.)