US producer prices rise by 0.2% in December, slower than anticipated

Investing.com - US producer prices rose at a slower-than-anticipated rate in December, suggesting a possible easing in inflationary pressures that could factor into how the Federal Reserve approaches future interest rate decisions.

Producer prices index for final demand increased by 0.2% on a month-on-month basis, Labor Department data showed on Tuesday. Economists had anticipated the reading would match November's pace of 0.4%.

The uptick in December was linked to a 0.6% advance in the index for final demand goods, while prices for services were unchanged, the Labor Department said.

Compared to a year earlier, the PPI ticked up by 3.3%, accelerating from 3.0% in the prior month but cooler than estimates of 3.5%.

Meanwhile, prices for final demand foods, energy, and trade edged up by 0.1%, the same as November, and moved higher by 3.3% in 2024. It had gained 2.7% in 2023.

The report is due to be followed up later in the week with a fresh look at consumer prices. The data points, along with last week's blockbuster employment numbers, could influence forecasts for the trajectory of inflation -- and, by extension, Fed monetary policy -- in the months ahead.

Analysts at Vital Knowledge said the PPI figure represented a "fairly large relief" for investors following Friday's hot nonfarm payrolls return.

Worries have recently grown that the resilient economic data and President-elect Donald Trump's strict tariff plans could reignite lingering price pressures, boosting yields on the benchmark 10-year US Treasury note and threatening the attractiveness of stocks.

Doubts have subsequently surrounded whether the Fed will potentially roll out interest rate cuts this year, after having slashed borrowing costs by a full percentage point in 2024. Indeed, analysts at Bank of America have even projected that the central bank could once again decide to hike rates.