Prices at the wholesale level surged in December, pushed higher by food and energy costs.
The Labor Department said Wednesday that the U.S. producer price index rose by 0.9 percent last month, on the heels of November’s two-percent increase. Excluding the volatile food and energy sectors, prices increased at a 0.2 percent clip.
At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.5 percent in December after climbing 0.7 percent a month earlier, and the crude goods index increased 2.9 percent following a 15.7-percent gain in November.
Within manufacturing, the PPI edged up 0.3 percent in December after increasing 0.4 percent in the previous month. In December, higher prices received by the manufacturers of petroleum and coal products, food, computer and electronic products, machinery, and fabricated metal products outweighed lower prices paid to the manufacturers of transportation equipment, chemicals, and beverage and tobacco products.
In 2006, prices received by the manufacturing sector increased 2.7 percent compared with a 5.4-percent rise in 2005.
Separately, the Federal Reserve said Wednesday that industrial production rose 0.4 percent in December after a decrease of 0.1 percent in November. Output in November was previously estimated to have advanced, but weaker data for a number of industries, particularly steel, led to the downward revision.
For the fourth quarter as a whole, industrial production decreased at an annual rate of 0.5 percent. In the manufacturing sector, output increased 0.7 percent in December, and most major industry groups registered gains. The output of utilities fell 2.6 percent, the result of relatively mild temperatures during the month, while the output of mines moved up 0.8 percent.
Over the twelve months ending in December, total industrial production increased 3.0 percent, and total industrial capacity expanded 2.4 percent. The rate of capacity utilization in December, at 81.8 percent, was 0.5 percentage point above its year-earlier level and 0.8 percentage point above its 1972–2005 average.
“The 0.4 percent increase in industrial production and 0.7 percent gain in manufacturing production in December were surprisingly strong given the weakness in housing and lackluster growth in Christmas sales,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.He noted that the unusually warm weather boosted traffic to motor vehicle showrooms, which helped production in the industry. Strong business profitability and solid balance sheets remain positive for investment spending, which helped the rebound in machinery, electronic, and electrical equipment.
“Even with the December rebound, manufacturing production declined 1.4 percent at annual rate in fourth quarter 2006,” he added. “The Manufacturers Alliance/MAPI expects to see manufacturing consistently growing again in first quarter 2007. The December report is a positive signal.”
