The prices of goods sold by U.S. businesses fell in December pushing the Labor Department’s producer price index into a decline for the first time since August.
The producer price index, which measures prices received by U.S. businesses for their goods and services, fell 0.5 percent in December, the Labor Department said Wednesday. This was a larger retreat in prices than the 0.1 percent expected by economists. In fact, it was a bigger drop than any economists surveyed by Econoday forecast.
The drop in the producer price index likely reflects the weaker-than-expected retail sales numbers for December. These fell 1.1 percent, according to Commerce Department data released Wednesday. The consumer price index, which measures prices paid by households for goods and services, fell 0.1 percent in December.
Weaker holiday sales likely encouraged retailers, wholesalers, and producers to offer discounts on goods and services, pushing down nominal retail sales figures and the price indexes.
The decline was driven by a 1.6 percent drop in the prices of goods, which were led downward by energy prices, which fell 7.9 percent compared with a month ago. Food prices dropped 1.2 percent. Excluding food and energy prices, goods prices were up 0.2 percent.
Despite the recent retreat in prices, they are still much higher than a year ago in most categories. Compared with a year ago, the producer price index is up 6.2 percent. Food prices are up 14.2 percent. Energy prices are up 9.1 percent. Excluding food and energy prices, goods prices are up six percent.
The services side of the economy is still seeing prices rise. The producer price index for services rose 0.1 percent for the month, less than analysts expected. Compared with a year ago, services prices are up five percent.
Trade services, which measure the change in margins at wholesalers and retailers rather than price changes, were up 0.3 percent and have gained 8.7 percent from a year earlier. Transportation and warehousing prices fell 0.3 percent, the second consecutive monthly decline, putting the year-over-year increase at 10.8 percent. Transportation and warehousing prices have fallen in four out of the last five months.
Services excluding trade, trade transportation, and warehousing—often referred to as core services—was flat for the month and is up 2.5 percent year-over-year.
Prices of goods and services for domestic use, a measure which excludes exports, fell 0.5 percent. Prices of goods produced for export fell 0.9 percent, reflecting a strong dollar and weak global demand. Prices of exported services were flat.
Prices of personal consumption goods less energy, food, and trade services were flat for the month and up 3.5 percent for the year.
The prices of processed goods for intermediate demand, meaning they are purchased by businesses and will contribute to goods sold to their end-users, fell by 2.4 percent. The prices of unprocessed goods for intermediate demand, including materials for manufacturing fuels, rose 3.4 percent. The prices of services for intermediate demand rose 0.4 percent.
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