Americas

Americas

U.S. producer prices advance, but inflation still tame

16 January 2014 03:32 (UTC +04:00)

Baku-APA. U.S. producer prices recorded their largest gain in six months in December as the cost of gasoline rebounded strongly, but there were few signs of any sustained price pressures, APA reports quoting Reuters.

The Labor Department said on Wednesday its seasonally adjusted producer price index rose 0.4 percent last month, the biggest rise since June, after slipping 0.1 percent in November.

Even with the latest rise, however, prices at the wholesale level were up only 1.2 percent from a year-ago, suggesting a continued lack of pressure on the prices consumers pay.

"We are still seeing very subdued inflation pressures. The type of economic growth we see in 2014 is likely to lead to a slow normalization in consumer prices, not a fast one," said Laura Rosner, an economist at BNP Paribas in New York.

December's rise in prices received by the nation's farms, factories and refineries ended two straight months of declines and matched economists' expectations.

Wholesale prices excluding volatile food and energy costs increased 0.3 percent, the biggest gain since July 2012, after ticking up 0.1 percent the prior month.

However, tobacco accounted for nearly half the increase. Wholesale tobacco prices typically rise in December.

Over the past 12 months, the core price index was up just 1.4 percent.

Despite an acceleration in economic activity in recent months, inflation is well below the Federal Reserve's 2 percent target. Economists say that is largely because a large amount of slack in the labor market has kept wage gains under wraps.

The Fed in a separate report on Wednesday said the economy was growing at a moderate pace and noted that prices largely remained stable, though there had been some small increases.

While the central bank plans to bring its bond-buying stimulus to an end this year, the lack of inflation should allow it to keep interest rates near zero for even longer.

"There is no reason to expect much stiffening up of price gains this year," said Michael Montgomery, a U.S. economist at IHS Global Insight in Lexington, Massachusetts.

U.S. Treasury debt prices fell on the inflation data, which some traders viewed as a sign of strength in the economy, while the dollar rose against a basket of currencies. U.S. stocks pushed higher, helped by strong bank earnings.