Rise in producer prices in U. S. is concern
2023.02.16 14:41
Rise in producer prices in U. S. is concern
By Ray Johnson
Budrigannews.com – Last week, an unexpected drop in the number of Americans filing new claims for unemployment benefits provided further evidence of the economy’s resilience in spite of tighter monetary policy.
According to additional data released on Thursday, the cost of energy products caused monthly producer prices to rise by the most in seven months in January. The reports, which came on the heels of data this week showing robust growth in retail sales in January and an acceleration in monthly consumer prices, helped to stoke financial market fears that the Federal Reserve could maintain its interest rate hike campaign through summer. Prices for the so-called core goods recorded their biggest gain since May.
Lead U.S. economist at Oxford Economics in New York, Michael Pearce, stated, “Labor market conditions remain exceptionally tight.” That is in line with the majority of the other indicators, which indicate that the labor market is still showing a lot of momentum. As a result, the Fed is on track to raise rates at its meeting in March and probably also at its meeting in May.”
The Labor Department reported that initial claims for state unemployment benefits decreased by 1,000 to a seasonally adjusted 194,000 for the week ending February 11. Reuters polled economists and predicted 200,000 claims for the most recent week.
Last week, unadjusted claims fell 9,280 to 224,727, indicating a significant decrease in California applications. Illinois and Pennsylvania saw significant declines in claims, while Ohio and Michigan saw increases.
Despite prominent layoffs in the technology sector and interest-rate-sensitive industries, claims remain low. Due to severance packages, some of the laid-off workers may be delaying filing for benefits or finding new employment.
After having trouble recruiting during the pandemic, businesses are typically reluctant to lay off employees. This week, the National Federation of Independent Businesses reported that “owners are still seeing opportunities to grow their business” because a higher percentage of small businesses reported having job openings in January.
This month, government statistics revealed that for every unemployed person in December, there were 1.9 job openings.
The claims report also revealed that, as a proxy for hiring, the number of people receiving benefits after an initial week of assistance rose by 16,000 to 1.696 million in the week ending February 4.
The lowest unemployment rate in more than 53 years exemplifies labor market resilience. Since March, the Fed has increased its policy rate by 450 basis points, moving it from close to zero to a range of 4.50 percent-4.75%.
The majority of these increases occurred between May and December. Financial markets are betting on another 25 basis point increase in June, despite the fact that two additional rate hikes are anticipated in March and May.
Stocks in the United States opened lower. The dollar held its value in relation to a group of currencies. The prices of US Treasurys dropped.
The producer price index for final demand increased by 0.7% in January, the largest increase since June, according to a second Labor Department report released on Thursday. In December, the index decreased by 0.2%. After falling by 1.4% in December, the rise was led by a 1.2% increase in goods prices.
Nearly a third of the rise in goods was caused by a 6.2% increase in gasoline prices. In addition, prices for automobiles, diesel fuel, jet fuel, soft drinks, and residential goods went up.
However, prices for fresh and dry vegetables fell 33.5%. Prices for core goods increased by 0.6%, excluding food and energy. After a 0.2 increase in December, that was the largest price increase for core goods in eight months. Services saw the same 0.4% increase as in December.
After rising 6.5% in December, the PPI increased 6.0% in the year to January. The PPI was expected to rise by 0.4% and by 5.4% year-over-year, according to economists.
The housing market, the main cause of the aggressive policy tightening stance taken by the U.S. central bank, remained negative. The Commerce Department reported in a third report that single-family housing starts, which make up the majority of new homes built in the United States, decreased by 4.3% in January to a seasonally adjusted annual rate of 841,000 units.
The Northeast and West saw a decline in the construction of single-family homes, with the latter likely being hampered by California’s flooding. Both the heavily populated South and the Midwest saw an increase in home construction.
The rate of starts for housing projects with five or more units decreased by 5.4% to 457,000 units. Demand for rental housing continues to drive multifamily housing construction.
Overall housing starts fell 4.5 percent to a rate of 1.309 million units last month, the lowest level since June 2020, as single-family and multi-family homebuilding declined.
Permits for housing projects with five or more units increased by 0.5 percent to 563,000 units, while single-family building permits decreased by 1.8% to 718,000 units. The total number of building permits increased by 1% to 1.339 million units.
