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Producer Price Index Dips Slightly

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American manufacturing received another hint this morning that the Federal Reserve may not become extremely aggressive in increasing interest rates this year.

The U.S. Producer Price Index rose just .8 percent in February, the Labor Department said today. The new level, which is seasonally adjusted, is down from a 1.2 percent increase in January.

The Federal Reserve this week is widely expected to begin boosting interest rates for the first time since 2018. Because of recent jump in the Consumer Price Index and other measures of inflation, some economists had forecast that the Fed would raise rates several times throughout 2022.

Later, however, some Fed-watchers began tempering their forecasts of an aggressive pace of hikes while assessing prospects of an economic shock that may result from Russia’s invasion of Ukraine.

Prices for final-demand services were unchanged in February after an increase of 1 percent in January, the Bureau of Labor Statistics reported in a statement. Within that measure, transportation and warehousing costs were up but were offset by decreases in some wholesale and retail segments.

Drilling deeper into the PPI statistics, however, reveals that concerning signs of inflation remain evident in the supply chain. Prices for final demand goods leaped by 2.4 percent in February, driven by higher energy prices.

It was the largest increase since the bureau began tracking the final demand goods data in 2009.

“Nearly 40 percent of the February increase in prices for final demand goods can be attributed to the index for gasoline, which rose 14.8 percent,” the Bureau of Labor Statistics said in its statement. “Prices for diesel fuel, electric power, jet fuel, motor vehicles and equipment … also advanced.”

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