Business-Level Inflation Falls Unexpectedly -- Update
U.S. producer prices fell in December for the first time in more than a year, a sign inflation pressures remain modest even though the economy appeared to pick up steam last year.
The producer-price index, a measure of the prices businesses fetched for their goods and services, fell 0.1% in December from a month earlier, the Labor Department said Thursday. That marked the first decline since August 2016.
Prices fell broadly, particularly for services in industries like airline travel and apparel. Excluding volatile food and energy categories, so-called core prices also fell 0.1%.
Economists surveyed by The Wall Street Journal had expected both overall and core prices to climb 0.2% last month.
Economists track producer prices for early signs of where consumer prices -- the main gauge of inflation -- are headed. Inflation has been modest throughout much of the expansion, though there have been recent signs of a pickup. The economy grew at an above 3% annual rate in the second and third quarters of last year, faster than the overall trend of roughly 2% during the current economic expansion.
Typically, stronger economic growth leads to higher prices, but inflation has been weaker than expected in recent years for reasons economists are debating.
Some economists said they believe December's decline reflected temporary factors, such as retailers offering discounts during the holiday season, and that underlying trends continue to point to firmer inflation.
Over a broader period, producer prices have risen. Producer prices rose 2.6% in December compared with a year earlier, the largest calendar-year increase since 2011. Core prices climbed 2.3% last year.
"The core data continue to show a sizable net pick-up in the past year," economist Jim O'Sullivan of High Frequency Economics said in a note to clients.
The Labor Department said the December decline in prices owed largely to lower prices for services, including for car fuels, airline travel and apparel retailing.
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(END) Dow Jones Newswires
January 11, 2018 10:58 ET (15:58 GMT)