Producer Price Index of Wholesale Prices Drops for Third Month, Indicating Easing Inflation

The Producer Price Index (PPI) declined for a third consecutive month in December.

Final demand prices fell 0.1% in December after dropping 0.1% in November and 0.4% in October, in seasonally adjusted figures, the Bureau of Labor Statistics (BLS) said in a Friday (Jan. 12) press release.

“The December decrease in the index for final demand is attributable to a 0.4% drop in prices for final demand goods,” the BLS said in the release. “The index for final demand services was unchanged.”

The decline in December was unexpected, Reuters reported Friday. Economists polled by the media outlet had expected the PPI to increase 0.1%.

The drop suggested inflation could continue to slow as well, allowing the Federal Reserve to start cutting interest rates, according to the report.

For the year, on an unadjusted basis, the index for final demand rose 1.0% in 2023 after leaping 6.4% in 2022, according to the BLS press release.

Nearly 60% of the decrease in the index for final demand goods in December resulted from a 1.2% drop in prices for final demand energy, the release said.

Prices for final demand foods moved down 0.9%, while those for final demand goods less foods and energy did not change, per the release.

The index for final demand services did not change in December, November or October, according to the press release.

The PPI measures wholesale prices, meaning some of the input costs that are tied to the day-to-day cost for merchants and other businesses. Generally speaking, changes in the wholesale prices lead to changes in the Consumer Price Index (CPI) down the line.

PYMNTS Intelligence has found that signs of relief were observed at the end of 2023 after high prices being experienced through most of the year.

The high prices made last year a challenging one for businesses, especially the small- to medium-sized businesses (SMBs) that are most vulnerable, according to “Main Street Health Q4 2023: eCommerce Protects Main Street SMBs’ Bottom Line in a Cooling Market,” a PYMNTS and Enigma collaboration.

In a December survey by the National Federation of Independent Businesses, nearly a quarter of small businesses said inflation remains the most important problem when it comes to operating their businesses.