PPI Falls In December

Date: January 19, 2016

Producer Price Index 0.2% Lower In Line With Economists’ Forecasts

According to the latest Labor Department data, the Producer Price Index fell 0.2% in December following a 0.3% rise in November and a 0.4% decline in October. For 2015 as a whole, the final demand index declined 1.0% after a 0.9% increase for all of 2014. December’s decrease in the overall final demand index was due to a 0.7% dip in the prices of final demand goods, the Labor Department said. Meanwhile, the index for final demand services rose 0.1% in December. Looking at intermediate demand, the processed goods index was down 1.0% in December, while unprocessed goods prices fell 3.0%, and the index for services rose 0.2%. Bloomberg News reported that the general Producer Price Index’s decline was in line with economists’ forecasts. For the 12 month period ending in December, PPI is down 1 percent. Core PPI, which excludes the volatile food and energy categories, was up 0.1 percent for the month and 0.3 percent for the 12 month period. The AP reported that while the Federal Reserve raised its benchmark Federal funds rate in December, “many economists say the absence of inflation pressures may delay future rate hikes.” Similarly, CNBC reported that the PPI fell “as energy prices dropped sharply, a trend that could temper expectations that inflation will rise this year toward the Federal Reserve’s target.”

What This Means For Small Businesses

The latest data indicate that while some areas of the US economy are showing improvements, the situation among factories and manufacturers continues to be less certain, with sluggish and uneven growth. The sector may continue to face additional setbacks in 2016. In the latest NFIB report on Small Business Economic Trends, NFIB Chief Economist William Dunkelberg said, “With the manufacturing sector in decline, large firms aren’t likely to add as much to growth in 2016. Auto sales have been strong, but will likely fade in 2016.”

Additional Reading

Reuters also reported the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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