Producer Price Inflation Unexpectedly Declines in February

James Hyerczyk
Updated: Mar 15, 2023, 13:20 UTC

US Retail sales fell 0.4% in February, in line with expectations but it remains to be seen if is a temporary setback or a more sustained trend.

ppi, retail sales

Key Takeaways

  • Wholesale prices dropped 0.1% in February, against the Dow Jones estimate for a 0.3% increase
  • Retail sales in the US fell 0.4% in February, in line with expectations
  • The Empire State Manufacturing Survey showed a -24.6 reading for March, down 19 points from a month ago.

Wholesale Prices See Unexpected Decline in February, Easing Inflation Concerns for Federal Reserve”

In February, wholesale prices unexpectedly declined, providing some relief on inflation concerns for the Federal Reserve as they weigh their next move on interest rates.

The Labor Department reported a 0.1% drop in the producer price index for the month, against the Dow Jones estimate for a 0.3% increase and compared to a 0.3% gain in January. On a 12-month basis, the index increased by 4.6%. But it remained below the downwardly revised 5.7% level from the previous month.

The index rose 0.2% excluding food, energy, and trade, which was down from the 0.5% gain in January. On an annual basis, the reading was up 4.4%, which was the same as in January.

The sharp pullback from the 1.2% surge in January was due to a 0.2% drop in goods prices. Final demand foods tumbled 2.2%, while energy declined 0.2%. A 36.1% plunge in chicken egg prices, which had soared over the past year, resulted in the majority of the decrease in goods prices.

This decline in wholesale prices is a welcome sign for the Federal Reserve as they try to balance their interest rate policies while monitoring inflation. With the index coming in below expectations and showing a slowdown in the pace of inflation, the Federal Reserve may take a more cautious approach with interest rates in the coming months. However, analysts are unsure whether this decline is a one-off event or a trend that will continue in the months ahead.

Retail Sales Drop 0.4% in February, as Food and Drink Establishments Lead Decline

According to data that is not adjusted for inflation, retail sales in the United States fell 0.4% in February, the Commerce Department reported on Wednesday. The total was in line with expectations.

Food services and drinking establishments, which had seen strong receipts over the past year, fell 2.2% for the month. However, they were still up 15.3% on an annual basis. Furniture and home furnishing stores experienced a 2.5% decline, while miscellaneous retailers saw a 1.8% drop.

It remains to be seen if this decline is a temporary setback or a more sustained trend. The Federal Reserve has been closely monitoring economic indicators such as retail sales. It is considering its next steps on interest rates and monetary policy.

New York Manufacturing Sector Shows Sharp Decline in March

The Empire State Manufacturing Survey, which tracks business activity in the New York region, revealed a -24.6 reading for March. This figure represents the percentage difference between companies reporting expansion versus contraction. The reading was down 19 points from the previous month, and it was significantly below the Dow Jones estimate of -7.8.

The survey’s sharp drop was mainly due to significant decreases in new orders, shipments, and inventories. The employment index also edged lower, as did the prices index.

This report indicates that the manufacturing sector in the New York region is experiencing a significant slowdown. The decline in new orders and shipments suggests a decrease in demand, which could lead to reduced production and employment. The decrease in inventories may also signal that businesses are becoming cautious about future sales prospects.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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