December 2023 Wholesale Inflation Drops Sharply: Prices Fall 0.5%, Annual Rate at 6.2%

In December 2023, wholesale prices experienced a notable decline of 0.5%, marking the steepest monthly decrease since April 2020. On a yearly basis, the Producer Price Index (PPI) rose by just 6.2%, a significant slowdown from 7.3% in November and the lowest annual increase since March 2021.

This unexpected easing in wholesale inflation underscores the effectiveness of the Federal Reserve's aggressive policies aimed at taming inflation. Economists had predicted a smaller drop, making this decline a positive indicator for the broader economy.

When excluding volatile categories such as food, energy, and trade services, the PPI edged up slightly by 0.1% month-over-month, while the annual rate dipped to 4.6% from 4.9% the previous month.

Goods final demand prices plunged 1.6%, the largest drop since July 2023, largely driven by a 13.4% decrease in gasoline prices. Food prices also fell for the first time in four months, down 1.9%, led by a 9.4% reduction in fresh and dry vegetable costs. However, egg prices surged sharply by 24.5%, reflecting supply constraints.

Service Sector Prices See Modest Rise

In contrast to goods, final demand prices for services increased by 0.1%. Notable price hikes occurred in fuels and lubricants retailing, which rose 17.6%, and banking deposit services, which climbed 16.4%.

This latest PPI data aligns with recent reports indicating a slowdown in consumer inflation last month, further suggesting that inflationary pressures are gradually easing across the economy.

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