Producer Prices: Pipeline Pressures Continued to Ease

Bottom Line:  Producer prices fell more than expected at the headline level in December as energy prices slumped. Core prices saw continued slower inflation as services, especially those related to transportation and warehousing, joined the slowdown in goods prices that started in the 3rd Quarter. Processed goods led the declines in goods, most notably in chemicals, lumber, and steel mill products. Medical-related categories saw modest increases with inpatient healthcare up 0.3% and outpatient care prices edging only slightly higher, potential good barometers for that critical category in the consumer prices report.  Overall, this report confirmed the continued correction in core goods prices and deceleration in services price inflation. Core PPI was running at just 2.2% annualized in the three months that ended in December, well below the pace of the last six- and 12 months, 2.9% and 5.5%, respectively.

The PPI FELL by 0.5% in December, compared with market expectations for an increase of 0.4%. Overall producer prices are 6.2% ABOVE the year-ago level.
 
The Goods PPI FELL by 1.6% in December but is now 7.9% ABOVE its year-ago level. Food prices fell by 1.2% but are now 14.2% ABOVE their year-ago level.  Meanwhile, energy prices fell by 7.9%. but are now 8.6% ABOVE their year-ago level. The Goods PPI less food and energy  ROSE by 0.2%,  and is now 6.0% ABOVE its year-ago level.The Services PPI ROSE by 0.1% in December and is now 5.0% ABOVE its year-ago level.
 
The Core PPI ROSE by 0.1%, compared with market expectations for an increase of 0.3%.  Core producer prices are now 5.5% ABOVE their year-ago level.