US producer prices up 0.1 per cent in January

WASHINGTON – U.S. producer prices edged up slightly in January as the biggest rise in food costs in eight months offset a further decline in energy prices. The tiny overall increase indicated that inflation pressures remain modest.

The Labor Department said Wednesday that its Producer Price Index rose 0.1 per cent in January after having fallen 0.2 per cent in December. Over the past year, the PPI, which measures inflation pressures before they reach the consumer, is down 0.2 per cent.

Core inflation, which excludes energy and food, rose 0.4 per cent in January, the biggest one-month jump in 15 months. Over the past 12 months, core inflation is up 0.6 per cent.

A big drop in energy prices in the past two years and a strong dollar have combined to keep inflation low.

Jennifer Lee, senior economist at BMO Capital Markets, said that the increase in core prices at the wholesale level could attract attention at the Federal Reserve, where a number of officials have said they will be watching for signs of higher inflation in determining when to raise a key interest rate again. The Fed raised the rate in December for the first time in seven years but held off boosting rates in January.

The Fed has said further increases will depend on seeing movement toward achieving the Fed’s goal of annual price increases of 2 per cent. The Fed believes that is the optimal level for inflation and readings below that target raise concerns about the potential threat of deflation.

Inflation pressures at the consumer level have also been low. For all of 2015, consumer prices were up just 0.7 per cent, the smallest annual increase in seven years.

For January, energy prices fell 5 per cent, reflecting big drops in all types of energy. Gasoline prices were down 8.8 per cent. The nationwide average for a gallon of gas now stands at $1.71, 55 cents lower than a year ago, according to AAA.

Food costs jumped 1 per cent in January with big increases in the cost of fish, beef and vegetables.