2024, the year of sharp acceleration. Services, accounting for two-thirds of PPI, are where inflation is festering and accelerating.
By Wolf Richter for WOLF STREET.
This time, the prior months’ data of the Producer Price Index were revised up by relatively small amounts, unlike the whopper up-revisions over the past four months. So November’s overall PPI reading was revised up to a year-over-year increase of 3.00%, from 2.98% reported a month ago. So that lack of big up-revisions was refreshing.
But then the December PPI, as reported today by the Bureau of Labor Statistics, accelerated to an increase of 3.31%, driven largely by services, which account for two-thirds of the overall PPI, and which accelerated to 4.03%. Both increases were the worst since February 2023.
The year of sharp acceleration: Overall PPI accelerated from 1.06% in December 2023 to 3.31% in December 2024, driven by services, which accelerated from 1.80% in December 2023 to 4.03% in December 2024.
The PPI tracks inflation in goods and services that companies buy and whose cost increases they ultimately try to pass on to their customers.
On a month-to-month basis, the PPI for final demand rose by 0.22% (2.7% annualized) in December from November. The six-month average has been around the 3% line for the past six months.
The plunge in energy prices from mid-2022 has stopped. It had reduced the overall PPI increases into the pre-pandemic range, and papered over the inflationary forces in services. But over the past three months, energy prices stopped dropping. In December, the energy index jumped by 3.5% from November, but thanks to the plunge earlier in the year was still down 2.0% from a year ago.
Food prices declined by 0.1% in December from November, after a 2.9% spike in the prior month, and on a year-over-year basis rose by 4.7%.
“Core” PPI, which excludes food and energy, accelerated to 3.55% year-over-year in December, the fastest pace since February 2023, up from 3.47% in the prior month.
On a month-to-month basis, Core PPI edged up 0.04% (0.5% annualized), after a series of hefty increases in the prior months.
The Services PPI, which accounts for two-thirds of the overall PPI, accelerated to 4.03% year-over-year in December, the fastest pace since February 2023, and up from 3.91% in the prior month.
Month-to-month, the Services PPI edged up by 0.5% annualized (+0.04% not annualized) after a series of hot increases over the past four months, ranging from +3.1% in November to +6.0% in August.
The “Finished core goods” PPI rose by 2.58% year-over-year in December, an acceleration from 2.48% in November, and the fastest increase since December 2023. On a month-to-month basis, the index rose by 1.9% annualized.
The index has more or less gently accelerated over the past six months. But the goods sector is not where inflation is a big issue at the moment.
The PPI for “finished core goods” includes finished goods that companies buy but excludes food and energy products.
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The post PPI Inflation Accelerates to +3.3%, Driven by “Core Services,” +4.0%, both the Worst Readings in Nearly 2 Years appeared first on Energy News Beat.
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