File - A consist of John Deere tractors sit in Norfolk Southern's Conway Yard in Conway, Pa., Monday, Dec. 5, 2022. On Thursday, the Labor Department releases the producer price index for January, an indicator of inflation at the wholesale level that's closely monitored by the Federal Reserve. (AP Photo/Gene J. Puskar, File)
WASHINGTON (AP) – Wholesale prices in the United States surged 6% in January from a year earlier, decelerating for a seventh straight month. But on a month-to-month basis, prices reaccelerated in January, indicating that inflation pressures continue to underlie the U.S. economy.
The latest year-over-year wholesale inflation figure was down from 6.5% in December and from a recent peak of 11.7% in March. From December to January, though, the Labor Department’s producer price index jumped 0.7%. That compared with a 0.2% drop from November to December.
The producer price data measures inflation before it reaches consumers. It reflects prices charged by manufacturers, farmers and wholesalers, and it flows into an inflation gauge that the Federal Reserve closely tracks. The data can provide an early sign of how fast consumer inflation will rise.
This week, the government reported that consumer inflation cooled for a seventh straight month compared with a year earlier. But the report also showed that inflationary pressures underlying the economy were likely to keep prices elevated well into this year. The year-over-year consumer inflation figure for January, 6.4%, remains well above the Fed’s 2% annual target.
Since March of last year, the Fed has raised its benchmark interest rate eight times in hopes of slowing the economy enough to conquer high inflation. Inflation has, in fact, eased since hitting a four-decade high in mid-2022. The rate hikes have had the broader economic effect of raising the costs of mortgages and auto loans as well as credit card interest rates.
Despite higher borrowing costs, the U.S. job market has remained surprisingly strong. Employers added a sizzling 517,000 workers last month – nearly three times what forecasters had expected – and the unemployment rate fell to 3.4%, lowest since 1969.
