Prices at the wholesale level increased very slightly in January, ending three straight months of declines.
The U.S. Labor Department reported inflation remained subdued at the beginning of the new year, with the Producer Price Index increasing 0.1% from December.
Excluding the volatile food and energy sectors, the index fell 0.1%. The price index has declined in six of the last 12 months and now stands 2.6% below a year ago.
The numbers beat those predicted in a poll of analysts by Reuters, who predicted an overall increase of 0.3% in January and a 0.1% jump in prices, when excluding those for food and energy.
“The January data did show significant price gains from December for some of the leading-edge products that typically feel the first impact of a change in economic demand,” says Newport Communications Senior Economist Jim Haughey. The index for crude energy materials rose 5.6%, lumber prices 6.9%, electronic components 1.1% and industrial materials 0.4%.
Haughey says, “Fleet managers should assume that we are likely now at the bottom of the price cycle and plan for costs, excluding labor and fuel, to be as much as 2% higher by the end of the year.”
In a separate report on Friday, U.S. industrial output fell in January. The Federal Reserve reported output of the nation's factories, mines and utilities fell 0.1% in January, its sixth straight drop after a revised 0.3% decline in December. Capacity in use fell to 74.2%, its lowest level since April 1983, but the number was close to many analysts’ expectations.
Activity was unchanged at manufacturing plants, after declining for more than a year, while warm weather and the worldwide decline in manufacturing sharply cut mining and utility activity.
Haughey says, “This means that freight activity into and out of factories has stabilized. Currently the strongest growth markets are computers, electronic components and chemicals, while paper, fuels and construction supplies are the weakest. Sustained growth in manufacturing is not expected for several more months, when most of the remaining surplus inventories will have been absorbed.”
Meantime on Friday, a survey of consumer feelings about the economy was down for the first time in five months. The University of Michigan's preliminary February consumer sentiment index fell to 90.9 from 93.0 in January. The drop was a surprise to some analysts because consumers have remained generally upbeat about the future of the U.S. economy despite the recent slide. It’s believed some of this pessimism is due to concerns over a struggling stock market.
This latest economic news follows other reports released earlier in the week.
The Commerce Department reported business inventories fell for the 11th straight month, which could lead to a demand for new factory orders.
Jobless claims are also down, with the Labor Department reporting its four-week moving average is at its lowest point since August 2000.