January’s Producer Price Index (PPI) data showed core inflation in line with expectations, but a notable revision to December’s figures indicated stronger price pressures than initially reported. According to FactSet Research Systems Inc., core PPI rose 0.3% month-over-month in January, matching consensus estimates. However, December’s figure was revised up from a previously reported flat reading (0.0%) to a 0.4% increase.
On an annual basis, core PPI climbed 3.6% year-over-year, surpassing the 3.3% consensus forecast. December’s annualized core PPI was also revised higher, from 3.5% to 3.7%. The final demand services index continued its upward trend for the sixth consecutive month, rising 0.3% in January. A major driver of this increase was final demand transportation and warehousing costs, which surged 0.6% month-over-month. Meanwhile, final demand goods also climbed 0.6%, marking the fourth consecutive monthly gain and outpacing services in a reversal of the prevailing 2024 trend.
The report follows Wednesday’s hotter-than-expected core Consumer Price Index (CPI) print, which led to further flattening of the Federal Reserve’s projected rate-cut path. Market expectations for the Fed’s first rate cut were pushed out to December following the CPI release. However, the slightly more tempered PPI report provided some relief, strengthening the policy-sensitive 2-year Treasury yield and moving expectations for the first rate cut forward to October.
Additionally, labor market data released today signaled continued strength in employment. Initial jobless claims for the week ending February 8 came in at 213,000, slightly below the 215,000 consensus estimate. Continuing claims also fell short of expectations, totaling 1.85 million versus a projected 1.881 million.
As markets digest the latest inflation and labor data, investors will continue to monitor signals from the Federal Reserve regarding the timing and pace of potential rate adjustments.
Data sourced from Factset Reseach Systems Inc.
