Coming on the heels of a report on Wednesday showing a broad increase in consumer prices in January, the PPI report bolsters expectations that inflation will gain steam this year even though its correlation with consumer prices has weakened.
Economists believe that a tightening labor, weak dollar and fiscal stimulus in the form of a $1.5 trillion tax cut package and increased government spending will lift inflation toward the Federal Reserve’s 2 percent target this year.
The U.S. central bank’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, has undershot its target since May 2012.
The Fed has forecast three interest rate increases this year, with the first hike expected in March. Most economists are, however, forecasting four rate increases this year because of rising inflation pressures.
Last month, the cost of hospital outpatient care surged 1.0 percent, the largest increase since August 2014, after gaining 0.1 percent in December.
Hospital inpatient care rose 0.3 percent. Overall, the cost of health-care services shot up 0.7 percent in January. Those costs feed into the core PCE price index.
Wholesale goods prices increased 0.7 percent last month, after nudging up 0.1 percent in December. Gasoline prices, which rose 7.1 percent, accounted for nearly half of the increase in the cost of goods last month.
Wholesale food prices fell for a second straight month. Core goods rose 0.2 percent for the second consecutive month.
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