Wholesale costs decreased nearly 0.5% from December, much over anticipated

January 19, 2023: Costs for wholesale goods and services decreased sharply in December, which provides another sign that inflation, while still increasing, is beginning to ease.

On Wednesday, the producer price index, measuring final demand cost across hundreds of categories, rejected 0.5% for the month, the Labor Department reported. Economists surveyed by Dow Jones had been looking for a 0.1% refusal.

Food and energy have been excluded; the core PPI measure increased by 0.1%, which matches the estimate.

A sharp decline in energy prices allowed bring the headline inflation reading down for the month. The PPI’s final demand energy index plunged 7.9% on the month. Within that category, wholesale gasoline prices dropped 13.4%.

The final demand food index also fell, declining 1.2%.

Inflation readings ahead could be less specific, though, as the cost for a gallon of gas is up about 21 cents from this time in the previous month, and crude oil costs are up about 1.6% so far in January.

Still, the prevailing trend in inflation has been negligibly lower. The consumer price index plunged by 0.1% in December but was still up 6.5% from a year ago to 5.7%, except for food and energy. CPI gauges consumers’ costs in the marketplace, while PPI measures what businesses pay for goods and services.

The declining prices were reflected in another economic report released Wednesday.

In December, Retail sales dropped 1.1%, negligibly over the 1% forecast. Those numbers are not modified for inflation, so the latest reading reflects receding inflation and tepid consumer demand during the holiday shopping season.