The U.S. January producer price data were worse than expected, but the world economy is so weak there is no reason to believe this indicates inflation will rise.

The January producer price index printed up 0.8% and core printed up 0.4% for a 1.0% decrease over the year overall. Over-the-year core PPI was stuck at plus-4.3%, the same pace as in December. The numbers were about twice expectations.

The core was boosted mainly by higher capital equipment prices, which could reflect January’s stated list-price hikes that companies are not actually paying. This included a 1.3% jump in communications equipment, a 1.0% in rise civilian aircraft, a 0.5% increase in light trucks, and a 0.3% gain in cars.

Intermediate PPI printed down 0.7% and crude fell 2.9%. These suggest there is still scope for a PPI drop ahead.

— Market News International

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