Wholesale Prices Drop Below Expectations, But Continue To Hammer Producers To Close Out 2022

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Wholesale prices dropped below investor expectations while still remaining high and continuing to squeeze producers in December, as core prices ticked up and wholesale prices nudged down on a monthly basis, the Bureau of Labor Statistics reported Wednesday.

Producer prices fell by 0.5% on a monthly basis in December, significantly undercutting investor expectations, with annualized inflation falling to 6.2% from 7.4% in November and continuing to fall from October’s annualized rate of 8.1%, according to the monthly Producer Price Index (PPI) from the BLS. Core prices, which discount the more-volatile food and energy indices, climbed 0.2% on a monthly basis to close out 2022 with an annualized rate of 6.0%.

Prices for various foods continued to run hot, with the price of eggs a standout, climbing 24.5% on a monthly basis to end the year up 191.8% on an annualized basis, the BLS reported. Other mainstays, such as fresh and dry vegetables, were up 92.3% on the year and pastas up 20.4%, while meats tended to stay relatively steady, with the exception of beef prices, which fell 7.8% on the year, and turkey prices, which grew by 35.6%.

The cost of energy continued to decline on a monthly basis, with the overall energy index falling 7.9%, due to a 13.4% monthly decline in the price of gasoline and 12.9% monthly decline in the cost of liquified petroleum gas, according to the BLS. Other prices continued to run hot, with heating oil and diesel up 37% and 20.4% on an annual basis, while residential natural gas and electricity costs were up 16.2% and 12.3%.

Consumer prices showed signs of cooling in December, fueling further investor speculation whether the Federal Reserve would “pivot” from its campaign of aggressive interest rate hikes designed to blunt economic demand and slow inflation. Several major asset managers, including BlackRock and Fidelity, have expressed doubts that inflation will be tamed by the end of the year, with BlackRock analysts anticipating that not even a recession would sway the Federal Reserve to lower interest rates.

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