By Jeffry Bartash MarketWatch
WASHINGTON — U.S. wholesale prices rose slightly in January spurred by higher costs of pharmaceutical drugs, but food and fuel prices fell.
The producer price index rose a seasonally adjusted 0.1 percent last month, the Labor Department said Thursday. Economists surveyed by MarketWatch had predicted a 0.5 percent increase, largely because of rising gasoline prices.
Yet a 2 percent increase in gasoline last month was more than offset by lower costs of electricity and home-heating fuel, a result of unseasonably warm winter weather.
Overall energy costs fell 0.5 percent in January.
A drop in energy prices is good news for consumers, leaving them more money to save or spend on other things. Yet gasoline prices are expected to rise as the spring approaches, so the savings could evaporate soon.
The wholesale cost of food, meanwhile, fell 0.3 percent in January, primarily because of lower prices for fresh and dry vegetables.
Minus those two categories, so-called core wholesale prices rose a surprisingly sharp 0.4 percent. That was double the MarketWatch forecast for a 0.2 percent increase.
The core index is viewed by the Federal Reserve as a more accurate gauge of inflationary pressure because it excludes the volatile food and energy categories. Core prices have risen 3.0 percent over the past 12 months.
The rise in the core rate was generated mainly by higher costs of pharmaceutical drugs, light trucks and appliances, the government said.
Pharmaceuticals jumped 2.0 percent in January, perhaps reflecting a problem with how the government calculates the data, some economists say. Labor introduced new seasonal-adjustment techniques in January.
The price of appliances surged 1.5 percent—the biggest one-month increase in 31 years. Appliance makers usually raise their prices at the beginning of the year.
Light truck prices rose 0.9 percent at the wholesale level.
Over the past 12 months, overall wholesale costs have risen 4.1 percent. While that’s higher than the Fed would like, it’s the lowest year-over-year increase since January 2011. Prices receded in the second half of last year after spiking in the spring.
Sustained increases in wholesale costs often translate into higher prices of consumer goods and services, but the relationship is not exact. Companies often absorb temporary increases in the cost of materials so they don’t lose customers to competitors.
The price index for intermediate goods, such as the cloth used to make clothes or stamped metal parts used in heavy machinery, fell 0.4 percent last month.
Crude prices—the cost of raw materials—jumped 1.5 percent in January.
Visit MarketWatch at www.marketwatch.com
Distributed by MCT Information Services