WASHINGTON, Jan. 15 (UPI) — The Labor Department said Wednesday the Producer Price Index, a key measure of inflation at the wholesale level, was unchanged in December after falling 0.4 percent in November and jumping 1.1 percent in October.
Economists on Wall Street were expecting the PPI to rise 0.3 percent during the final month of 2002.
Excluding the often volatile food and energy sectors, the so-called core PPI fell 0.3 percent after falling 0.3 percent during the previous month and rising 0.5 percent in October. Economists on Wall Street were expecting the core rate to rise 0.1 percent.
The report showed prices for energy, gasoline and food rose while prices for autos and capital equipment declined.
For all of 2002, wholesale prices rose 1.2 percent after declining 1.6 percent decline in 2001. Core prices declined 0.4 percent in 2002 after rising 0.9 percent during 2001.
Wall Street watches producer prices to determine whether inflationary pressures are building. The PPI measures price changes in the manufacturing sector. Inflation at this producer level often gets passed through to the consumer price index. By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months.
Inflation is a general increase in the prices of goods and services. The relationship between inflation and interest rates is the key to understanding how data like the PPI influence the markets.
By tracking the trends in inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform.
The latest report from the Labor Department showed passenger car prices declined 2 percent during the final month of 2002 after falling 3.6 percent in November and rising 2.2 percent in October.
Energy prices rose 0.8 percent during the month after declining 1.8 percent in November and jumping 4.2 percent back in October. Gasoline prices rose 1.6 percent after sinking 9 percent during the previous month.
The report showed food prices rose 0.4 percent after rising 0.3 percent during the previous month and rising 0.7 percent in October.
Prices for capital equipment such as machinery, tools and computers declined 0.4 percent after easing 0.2 percent in November and rising 0.4 percent in October. Computer prices fell 2 percent in December after falling the same 2 percent during the previous month.
Prices of intermediate goods eased 0.1 percent, matching November’s decline of 0.1 percent and after rising 0.7 percent in October. Excluding food and energy, intermediate prices rose 0.1 percent after rising 0.1 percent during the previous month.
The Labor Department said prices for crude goods, which are used at the earliest stage of production, rose 1.9 percent after rising 5.1 percent in November and 3.4 percent in October. Core crude goods prices, excluding food and energy, rose 0.2 percent after rising 0.4 percent in November and 0.9 percent in October.