(Bloomberg) -- U.S. wholesale inflation unexpectedly cooled in December, driven by lower food costs and flat service prices, which could help ease concerns about lingering price pressures.
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According to a report released by the U.S. Bureau of Labor Statistics on Tuesday, the final demand producer price index rose 0.2% month-on-month. A Bloomberg survey of economists showed the median forecast was for growth of 0.4%. Indicators excluding food and energy were unchanged from November.
Compared with the same period last year, the overall PPI increased by 3.3% and the core indicator increased by 3.5%, both of which were the highest levels since February 2023.
The producer price index (PPI) report comes ahead of the more closely watched consumer price index (CPI) released on Wednesday by the Bureau of Labor Statistics (BLS). Investors and consumers have raised their inflation expectations in recent weeks amid strong demand and threats from the incoming Trump administration to impose higher tariffs on imported goods.
U.S. Treasury yields fluctuated, S&P 500 futures held higher, while the dollar fell after the data.
Economists pay close attention to the PPI report because several of its components feed into the Fed's preferred inflation measure, the Personal Consumption Expenditures Price Index.
The picture in these categories was mixed in December, including no change in hospital care and slight gains in physician services and portfolio management. However, air ticket prices saw their largest increase since March 2022.
Stubborn inflation in the final months of 2024, combined with a resilient job market, has prompted Federal Reserve policymakers to scale back expectations for rate cuts this year.
food prices
The PPI report showed that food prices fell by 0.1%, with vegetable costs falling by nearly 15%. Egg prices surged nearly 56% in November as the bird flu epidemic worsened, but barely rose last month. Energy prices rose 3.5%.
Overall commodity prices rose 0.6% after rising 0.7% a month ago. Commodity prices excluding food and energy were unchanged.
Commodity prices rose broadly. Crude oil futures rose to a five-month high on Monday, while corn futures climbed to a seven-month high. These improvements come after huge gains for cocoa and coffee late last year.
Meanwhile, the PPI report showed no change in service prices, one of the mildest readings of 2024, reflecting lower profit margins.
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