For the first time in almost 1-1/2 years U.S. producer prices declined in December amid declining costs for services, which could alleviate the idea that inflation will accelerate in 2018. Other data on Thursday revealed that the number of Americans filing for unemployment increased for the fourth straight week to over a three-month high.
Nonetheless, weak inflation at the producer level could bring additional concerns that the dynamics holding down inflation may become more prominent and cause the Federal Reserve to become even more adamant to raise interest rates this year.
On Thursday, the Labor Department stated that its producer price index for final demand shed 0.1 percent in December. That was the first decline in the PPI since August 2016 and trailed two consistent months of increases of 0.4 percent. In the 12 months through December, the PPI gained 2.6 percent after increasing 3.1 percent the month prior. Economists that were polled had predicted the PPI to rise 0.2 percent in December and show an increase of 3.0 percent from the year prior.
A main gauge of fundamental producer price pressures that does not include food, energy and trade services climbed up 0.1 percent in December. The so-called core PPI gained 0.4 percent in November and rose 2.3 percent in the 12 months through December. The core PPI gained 2.4 percent in the 12 months through November.
The PPI data followed Wednesday’s a report that indicated a sharp decline in import prices in December. Economists are optimistic that the tightening of labor market and recent decline of the dollar will accelerate inflation to the Fed’s 2 percent target this year.
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The U.S. central bank’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, has missed its target since for nearly six years. Last year, the dollar lost 7 percent of its value against a basket of major currencies.
Following the data, the dollar dropped to a session low against a basket of currencies. Prices of U.S. Treasuries were trading lower while U.S. stock index futures were slightly higher.