WASHINGTON – U.S. wholesale prices rose 0.2 per cent in February, a sign that inflation is beginning to blip higher for producers even if consumers have yet to feel its pinch.
A pickup in wholesale services prices offset a drop in the cost of food and energy.
The Labor Department said Wednesday that the February increase in its producer price index was half January’s 0.4 per cent gain. Producer prices, which show inflation before it reaches consumers, have risen 2.8 per cent over the past year.
Energy prices fell 0.5 per cent in February, and food prices fell 0.4 per cent as fresh and dry vegetable prices plunged 27.1 per cent, most since May 2007. The wholesale price of services rose 0.3 per cent in February, matching the January increase. Prices for wholesale services rose 2.8 per cent over the past year, the biggest annual gain in records that date back to 2010. Transportation and warehousing prices rose 0.9 per cent, most since September. Excluding volatile food and energy prices, so-called core wholesale inflation rose 0.2 per cent for the third straight month.
“Inflation is beginning to creep higher, led by services, exactly what you might expect in an economy characterized by a drum-tight labour market,” Stephen Stanley, chief economist at Amherst Pierpont Securities, wrote in a research note. Unemployment has hovered at 4.1 per cent for five straight months.
Prices have been rising faster for producers than for consumers. The Labor Department reported Tuesday that consumer prices rose just 2.2 per cent over the past year. Core consumer inflation posted a 12-month gain of just 1.8 per cent.
The Federal Reserve wants to see inflation at roughly a 2 per cent annual pace. But the Fed’s preferred inflation measure has usually come in below that target for the past six years.