U.S. wholesale prices climb in latest sign of bubbling inflation, PPI finds
The numbers: U.S. wholesale prices shot up 0.4% in January, the latest sign that inflation is perking up.
The biggest culprit: higher oil prices. Yet a more stable measure known as core PPI also rose 0.4%, suggesting price pressures are more widespread.
The core rate strips out food, energy and trade margins — volatile categories that can distort the report from month to month.
What happened: The cost of most of wholesale goods and services rose in January. Aside from gas, prices also increased notably for scrap metal, power cranes, appliances, real-estate services and transportation.
Prices fell for some goods and services such as chicken eggs and airline tickets, the government said. Higher energy prices are bound to push airfares back up, however.
The 12-month rate of wholesale inflation rose a tick to 2.7% in January, but it’s still below a recent six-year peak of 3.1%.
The yearly rate of core inflation edged up to a record 2.5%, but the government only has data going back to August 2014.
The cost of partially finished goods and raw materials, meanwhile, both increased sharply in January. Yet these prices have only risen mildly over the past year.
The big picture: Inflation rose toward the end of 2017, and prices could head even higher this year. Fresh worries about inflation are largely responsible for the big retreat in U.S. stock markets in February.
Read: Don’t be scared by weak retail sales and rising inflation
Hardly anyone thinks inflation will turn ugly in 2018, but investors are nervous the Federal Reserve could raise interest rates four times this year instead of three as previously planned. A more aggressive Fed approach is bad for stocks and good for bonds.
Read: Inflation fears haunt Wall Street, but investors might having a bad dream
Market reaction: The Dow Jones Industrial Average DJIA, +1.03% and S&P 500 index SPX, +1.34% was set to open higher in Thursday trades.
In the bond market, which is highly sensitive to inflation, the 10-year yield TMUBMUSD10Y, +0.29% edged up to 2.92%.