Producer Price Index Increases 0.7% in January, Signaling Inflationary Pressures

On Thursday, the U.S. Bureau of Labor Statistics reported that the Producer Price Index for final demand increased 0.7% in January, seasonally adjusted.[0] This was higher than the 0.4% rise expected by economists surveyed by Dow Jones. The index for final demand less foods, energy, and trade services rose 0.6%, the largest advance since March 2022.[1]

Market participants keep a close eye on the Producer Price Index (PPI) as a gauge of wholesale inflation.[2] Producers usually charging more to consumers is seen as a key indicator, because of this.[2] The PPI announcement is of great importance to the Federal Reserve as they ponder the amount of rate hikes they will have to implement before ceasing.[2]

According to a Bloomberg survey of economists, the median estimates predicted a 0.4% rise in the index from the preceding month and a 5.4% increase from January 2022.[0] Following the report, the S&P 500 dropped and Treasury yields increased.[3] Core prices, not taking food and energy into account, increased by 5.4%, which was higher than the predicted 4.9%, but lower than the 5.5% of the preceding report.[4]

One of the major factors behind the rise in the PPI was a 1.2-percent rise in prices for final demand goods. The cost of services for ultimate consumption rose as well, with a 0.4 percent increase.[5] The index for final demand services less trade, transportation, and warehousing increased 0.6%, while hospital outpatient care prices rose 1.4%.[6]

Overall, the increase in producer prices is indicative of persistent inflationary pressures that could push the Federal Reserve to pursue further interest-rate increases in the months ahead.[3] The Fed currently holds its benchmark federal-funds rate in a range between 4.5% and 4.75%, the highest level since 2007. Analysts expect the Fed to increase interest rates a few more times this year, with the final rate ending around a range of 5.25%-5.55%.

The January inflation increase has been attributed by economists largely to seasonal factors, as well as compensation for previous months that had lower price increases.[7] The unusually mild winter could have been a factor, and fuel prices, which are unpredictable, also rose during the month.[7]

0. “Higher Gasoline Prices Drive U.S. Producer Price Index Higher”, 16 Feb. 2023,

1. “Producer price index reacclerates in January” Seeking Alpha, 16 Feb. 2023,

2. “Crypto Market Tumbles After U.S. PPI Data Comes At 6%” CoinGape, 16 Feb. 2023,

3. “U.S. producer prices exceed forecast in biggest gain since June” The Spokesman Review, 16 Feb. 2023,

4. “U.S. Producer Prices Climb 0.7% In January, More Than Expected” RTTNews, 16 Feb. 2023,

5. “Producer Prices Rose 0.7% in January” Floor Focus, 16 Feb. 2023,

6. “Producer Prices Rose in January, Signaling Continued Inflation” The Epoch Times, 16 Feb. 2023,

7. “Wholesale prices rose 0.7% in January, more than expected, fueling inflation increase” CNBC, 16 Feb. 2023,