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The numbers: U.S. wholesale prices rose sharply in January and returned close to pre-pandemic levels, suggesting inflation is on the rise again as the economy recovers from the coronavirus pandemic.
The producer price index jumped by 1.3% last month, the government said Wednesday. That’s the largest increase since the index underwent a major overhaul in 2009 and service prices were included in the report.
Economists polled by Dow Jones and Wall Street Journal had forecast a 0.5% increase.
The rate of wholesale inflation in the past 12 months climbed to 1.7% from 0.8% at the end of 2020 — not far from the prepandemic level of 2%.
What happened: Most of the increase in wholesale prices last month was tied to higher wholesale costs of gasoline, financial services and health care.
The core rate of wholesale inflation also surged by 1.3%. The core rate is a less volatile measure that strips out food, energy and trade margins. It tends to give a more accurate picture of inflationary trends.
The increase in the core rate over the past 12 nearly doubled in January to 2% from 1.1% in December and is now above pre-pandemic levels.
The cost of raw and partly finished goods in the earlier stages of production, meanwhile, also continued to move higher in January. They had been a negative for most of last year.
The cost of partly finished goods shot up 1.7% in January, putting the increase over the past year at 3.1%.
Raw-material wholesale prices leaped 3.8% last month. They’ve climbed 6.6% in the past year.
Big picture: Inflation almost disappeared early in the pandemic and even now it’s still fairly low despite a string of recent increases.
Some businesses face higher prices for certain supplies due to Covid disruptions and rising demand, but there’s little sign inflation is likely to become a big threat to the economy any time soon.
Market reaction: The Dow Jones Industrial Average DJIA, -0.09% and S&P 500 SPX, -0.38% fell in Wednesday trades. The surprising increase in wholesale prices put pressure on stocks, outweighing a strong increase in retail sales.
