Wholesale inflation heated up less than expected last month
Economists were expecting PPI to rise 0.3% on a monthly basis and move to 3.4% annually.
(CNN) — There appears to be some welcome news on the US inflation front.
Price hikes on the wholesale level were much tamer than anticipated in December, according to the latest Producer Price Index released Tuesday, indicating that inflation might not be reaccelerating as much as feared.
However, Tuesday’s positive PPI report may merely be “the calm before the storm,” cautioned economist Chris Rupkey at FwdBonds. President-elect Donald Trump has threatened to unleash a series of steep tariffs on key US trading partners, stoking fears that higher costs will be passed along to American consumers.
“A small victory today on the inflation front, and it is the incoming president-elect’s policies that can either continue the progress on inflation or worsen it,” Rupkey wrote in commentary issued Tuesday.
In December, the Producer Price Index, which measures the average change in prices paid to US-based producers for goods and services, rose 0.2% from the month before and 3.3% for the year ended in December, according to Bureau of Labor Statistics data released Tuesday.
A surge in energy costs was the culprit behind the monthly increase, according to the report. Wholesale energy prices rose 3.5% for the month (fueled by a 9.7% jump in gas prices) driving goods prices and the overall index higher.
In November, prices rose 0.4% for the month — driven higher in part by soaring egg prices — and 3% annually.
A closely watched measure of underlying inflation didn’t budge much at all in December: Core PPI, which excludes volatile food and energy prices, held flat from November and held pat at 3.5% annually.
Although PPI’s annual rate is at its highest point since February 2023, prices didn’t rise as much as anticipated: Economists were expecting PPI to rise 0.3% on a monthly basis and move to 3.4% annually.
“We’ve certainly seen a rebound in PPI inflation from the lows that we experienced in early 2024; but generally speaking, core PPI inflation and headline PPI inflation is still within the range that was in place before the pandemic,” Gregory Daco, chief economist at EY-Parthenon told CNN Tuesday. “That’s still very encouraging in terms of fundamental inflation pressures being still quite contained.”
PPI captures average price shifts before they reach consumers and serves as a potential bellwether for retail-level inflation in the months ahead.
Relief on the way for egg prices?
Monthly data can be quite volatile, but Tuesday’s PPI report showed that some relief may be coming consumers’ way on the egg front.
In December, wholesale prices of eggs for fresh use rose just 0.5% from the month before. They had soared 55.6% in November.
A highly contagious and deadly bird flu has devastated chicken farms, leading to egg shortages and higher prices for consumers. Those issues were exacerbated during the recent holiday season when eggs are in higher demand.
The average price of a dozen eggs of any kind at the end of December was $4.33, up nearly 25% from the beginning of November, according to Nielsen IQ data provided by the American Egg Board. And that’s on top of what has already been a startling rise throughout the year: Egg prices were up 37.5% year-over-year in November, according to the Consumer Price Index for that month.
The December CPI is due out Wednesday morning and is expected to reflect some of the 55.6% egg price surge seen by producers in November, EY-Parthenon’s Daco said.
“It will be a pressure point for CPI [Wednesday],” Daco said of the inflation gauge that captures prices changes for a broad basket of goods and services commonly purchased by consumers.
Economists expect the December CPI to rise 0.3% on a monthly basis, similar to the pace seen in November, and for the annual rate to nudge 0.1 percentage points higher to 2.8%, according to FactSet consensus estimates.
“The December data is likely to be carried by higher energy prices, higher egg prices and then potentially a little bit of a rebound — nothing major, nothing alarming — but a little higher shelter cost of inflation than what we’ve seen in the past,” he said.
But for consumers, based on what PPI is showing, those price shocks could be easing in the near future, he added.
“It’s not like those egg prices are going to rise at an increased pace forever,” Daco said. “You get the increase in prices once, and that’s really a reset in prices. But you don’t get it month after month after month.”
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CNN’s Vanessa Yurkevich contributed to this report.
