U.S. producer prices rose in January under the government’s new formula for measuring wholesale inflation, the Labor Department said Wednesday.
A new PPI index that tracks prices of goods and services meant to be sold to consumers increased 0.2%. The index is expected to give a heads up if consumer inflation is about to begin a sharp move up or down.
Excluding the volatile categories of food and energy, core prices for wholesale goods rose 0.4% last month.
Pharmaceutical costs shot up 2.7% during the month, while gasoline fell 1.3%, theLabor Department said.
Over the past year, U.S. wholesale prices have risen an unadjusted 1.2%, little changed from December but the highest level in three months.
The new PPI includes the wholesale cost of goods, as usual, and adds services, construction, government and exports for the first time.
Services such as retail, finance, education and health care now represent a much bigger slice of the economy than goods-producing industries.
As a result, the new formula captures price changes of three-fourths of all U.S. goods and services produced. The old PPI only looked at the goods, which account for one-third of production. In January, for example, a measure of loan services rose 2.1% while airline passenger costs dropped 4.3%.
The changeover is meant to make the PPI more relevant and act as an early warning signal for when the pace of inflation is about to shift.
Under the old method of calculating producer prices, the PPI index would have risen 0.6% overall or by 0.5% on a core basis excluding food and energy.
Source: Marketwatch
