Prices at the wholesale level moved slightly higher in February, while industrial production increased more than expected,
pointing to signs a strong economic recovery is ahead.
The U.S. Labor Department reported the Producer Price Index increased 0.2% for the month, after a 0.1% gain in January. Excluding the volatile food and energy sectors, wholesale prices were unchanged during February, following a 0.1% drop the month before. The numbers also mean the index is 2.6% lower than where it was a year ago.
This low inflation of the PPI will likely allow the Federal Reserve Board to delay raising interest rates as the economic recovery builds momentum, says Newport Communications Senior Economist Jim Haughey.
“This means a quicker recovery than most expected at the beginning of the year. Credit continued high productivity for restraining inflation. Productivity increased at a 2.3% annual pace over the last three quarters of 2001 instead of falling as it typically does during a recession or severe economic slowdown,” he says.
Haughey says, “Eventually, the continuing recovery will spur sharp rises in energy and commodity prices and push PPI inflation to 2% or more. But that is more than a year away.”
Meantime on Friday the Federal Reserve reported industrial production in February posted its biggest increase since June 2000. Output at the nation’s factories, mines and utilities rose 0.4% for the month, following a revised 0.2% increase in January, the first back-to-back increases since August and September 2000.
The manufacturing sector, which is the most important to the trucking industry, accounted for the largest part of the increase, jumping 0.3%. Overall production capacity also moved up to 74.8%, up from a revised 74.5% in January and the highest since October 2001.
The industrial production numbers mark the first solid increase in more than a year, Haughey says.
“This is good evidence the recovery has started,” he says. “Inventories have fallen to the point where production has to increase to keep up with demand.”
For the trucking industry, Haughey predicts carriers hauling durable goods will be for the first to see a pickup in their business.