WASHINGTON – Sales prices in the United States rose 6.2% in December from a year ago, a sixth straight decline and a hopeful sign that inflationary pressures will continue to cool.
The latest year-over-year figure was down from 7.3% in November and last time from 11.7% in March. On a monthly basis, the government said on Wednesday that its producer price index, which measures costs before they reach consumers, fell 0.5% from November to December.
Producer price data can provide an early indication of where consumer inflation is headed. The data reflects prices charged by manufacturers, farmers and wholesalers, and feeds into a measure of inflation that the Federal Reserve closely monitors, using a personal cost price index.
The continued decline in wholesale price growth suggests that inflation, the worst in four decades, is slowing, albeit well above the Federal Reserve’s 2% target.
Last month’s decline was driven by gas prices, which fell 13.4% between November and December. Gas prices averaged $3.36 a gallon Wednesday, according to AAA, down from a peak of $5 a gallon in mid-June.
Food prices decreased by 1.2%, led by vegetables, fruits and poultry. One exception was the price of eggs. Buoyed in part by a wave of avian flu, egg prices rose 25% in just over 11 months to December.
Excluding volatile energy and food costs, so-called primary producer prices rose just 0.1% from November to December. On a year-over-year basis, core prices increased 5.5% in December, compared to 6.2% in November.
“The big picture is one of rapid inflation, with more to come,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Manufacturing prices in the nation’s broad service sector – everything from restaurants and hotels to airlines and entertainment – rose just 0.1% from November to December, the smallest increase since last April. The Fed has been monitoring this area of the economy in particular as it assesses its progress in combating high inflation.
But growing evidence shows that inflation is slowing after hitting a four-year high last summer. At the consumer level, inflation also cooled in December for the sixth straight month to 6.5% compared to a year ago, from 7.1% in November.
Labor wage growth has also slowed, which could help curb inflation. In December, average wage growth in the United States was 4.6% 12 months ago, compared to a peak of 5.6% in March.
Last year, the Fed quickly raised key interest rates to freeze credit and spending and inflation, which began to rise more than a year and a half ago.
The Fed’s rate hikes have, in turn, driven up borrowing costs for consumers and businesses. The average mortgage rate is still almost double its level a year ago, although it has decreased in recent weeks. Interest rates on car loans, credit cards and various business loans are skyrocketing.
Even as general inflation slows down, costs continue to rise in some pockets of the economy. Especially in the service sector, wage growth continues to contribute to inflationary pressures.
