Wholesale-price increases add to picture of persistent inflation

By Jeffry Bartash

Producer-price index shows acceleration in price pressures

The biggest increase in wholesale costs since last summer is the latest in a string of readings that suggest inflation might not slow quickly toward the Federal Reserve's 2% goal.

The producer-price index jumped 0.6% in February, the government said Thursday. The increase matched the largest gain since last August.

Economists polled by the Wall Street Journal had forecast a 0.3% rise in the PPI.

The gauge measures what businesses pay other businesses for their supplies. Inflation tends to bubble up at the wholesale level before spilling over to consumers.

Over the past 12 months, wholesale prices have risen 1.6%, up from 1% in the prior month. That's the highest reading since September.

Key details: The latest PPI was boosted by energy prices. They rose 4.4% last month.

Food prices also snapped back with a 1% increase after declining in January.

If energy, food and trade margins are omitted, the so-called core rate of wholesale inflation rose a still-sharp 0.4%.

The 12-month core rate edged up to 3.8% from 3.7%. The core rate is viewed as a better predictor of future inflation.

Goods prices advanced 1.2% in February, reversing a recent downtrend.

Yet the cost of services - the chief source of current inflation - rose a smaller 0.3% in February. Hotel prices rose the most.

Inflation further down the pipeline warmed up a bit.

The wholesale cost of partly finished goods shot up 1.6% last month to mark the biggest gain since last summer. And the cost of raw materials rose by more than 1% for the second month in a row.

Big picture: The uptick in wholesale and consumer prices in February shows that the battle to bring down inflation is far from over.

Fed officials are primed to cut interest rates this year because inflation has slowed considerably since a series of rate hikes starting in early 2022.

Yet they want more convincing proof inflation is returning to prepandemic levels of 2% or less before they make a move.

The latest readings of the consumer-price index and producer-price index didn't provide such confidence.

Looking ahead: "There is not much good news here for Fed officials scouring for evidence that inflation is benignly cooling to 2%," said chief economist Stephen Stanley of Santander Capital Markets.

Market reaction: The Dow Jones industrial average DJIA and S&P 500 SPX fell in Thursday trading after the hottish PPI report. Bond yields BX:TMUBMUSD10Y rose.

-Jeffry Bartash

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03-14-24 1606ET

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