AP News

Ahead of the Bell: US Wholesale Prices


WASHINGTON (AP) — Higher food and gas costs likely pushed up a measure of wholesale prices last month. Still, wholesale inflation is thought to have remained tame at the start of the year.

Economists forecast that the producer price index rose 0.4 percent in January, according to a survey by FactSet. That would be the first increase after three straight declines. The index fell 0.2 percent in December after a 0.8 percent drop in November.

If the forecasts are accurate, it would mean that wholesale prices rose a modest 1.6 percent in the 12 months that ended in January. Excluding the volatile food and gasoline categories, wholesale prices likely rose only 0.2 percent last month.

The Labor Department will release the report at 8:30 a.m. EST Wednesday.

The index measures the cost of goods before they reach consumers. Wholesale prices are what manufacturers and farmers receive for their products from retailers and distributors.

Higher wholesale prices don't always mean consumers will soon pay more. High unemployment and weak pay gains are making it difficult for retailers to pass on higher costs to consumers.

Wholesale price increases slowed last year. In 2012, they rose just 1.3 percent, much lower than the 4.7 percent increase in 2011. Core prices rose 2 percent last year compared with a 3 percent rise in 2011.

Cheaper gas and mild increases in food costs have helped restrain inflation. Wholesale energy prices fell 1.3 percent last year compared with a 7.8 percent increase in 2011. Food prices rose 2.3 percent in 2012 compared with a 6 percent increase the previous year.

Low inflation means consumers can spend more on other goods and services, which helps the economy. It also gives the Federal Reserve room to keep interest rates low to try to spur economic growth. If prices were to begin rising rapidly, the central bank might be forced to raise rates to try to slow inflation.

As long as the inflation outlook stays mild, the Fed said it plans to keep the short-term interest rate it controls near zero until the unemployment rate falls to at least 6.5 percent.

Inflation will likely tick up in coming months, mostly because gas prices have risen. Nationwide, the average price of gas was $3.75 a gallon on Tuesday, according to AAA. That's an increase of 45 cents a gallon in just the past month.


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