Higher Gasoline Prices Drive U.S. Producer Price Index Higher

The Producer Price Index for final demand in the United States rose by a seasonally adjusted 0.7% in January, more than expected by analysts, with higher gasoline prices accounting for nearly one-third of the rise in the index for final demand goods.

The Producer Price Index for final demand increased by 0.7% in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported on Thursday, in yet another closely-followed inflation measure. The increase was higher than the 0.4% rise expected by economists surveyed by Dow Jones.  

“Nearly one-third of the January rise in the index for final demand goods can be traced to prices for gasoline, which increased 6.2 percent. The indexes for residential natural gas, diesel fuel, jet fuel, soft drinks, and motor vehicles also moved higher,” the Bureau of Labor Statistics said today.

The average gasoline price in the United States was $3.422 per gallon as of February 16, per AAA data. That’s higher than the national average of $3.305 per gallon a month ago.

The index for final demand goods rose by 1.2% in January, the largest increase since rising 2.1% in June 2022, the Bureau of Labor Statistics said today. Most of the January advance is attributable to a 5.0% jump in prices for final demand. The index for final demand goods without food and energy increased by 0.6%. 

The latest inflation-measure report following the one earlier this week that showed U.S. inflation cooled but at a lower pace, suggests that the Fed still has work to do to bring inflation under control, analysts say.

In addition, another report showed on Wednesday that U.S. retail sales grew by 3% on the month and by 6.4% on the year in January, the fastest clip in nearly two years and a reversal from a two-month slump.

“Although resilient consumer spending is a positive sign for the health of the economy, renewed demand for supply-constrained categories could add to inflation pressures, potentially eliciting more aggressive action from the Fed,” Kayla Bruun, economic analyst at decision intelligence company Morning Consult, told Reuters.

By Charles Kennedy for Oilprice.com

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