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Economic Report: U.S. wholesale prices rise scant 0.2% in December in sign high inflation might be starting to ease

The numbers: Wholesale prices rose just 0.2% in December to mark the smallest increase in 13 months, perhaps a sign that inflation is finally starting to ease after the biggest runup in nearly 40 years.

The increase in the producer price index fell below the 0.4% forecast of economists polled by The Wall Street Journal.

The advance in wholesale prices over the past year slipped to 9.7% from 9.8% in the prior month. It was the first decline in the yearly rate since early in the pandemic.

Still, that’s one of the biggest 12-month increases since the index was configured in 2009 and likely one of the fastest rates in almost 40 years.

A separate measure of wholesale prices that strips out the most volatile goods and services rose a faster 0.5% last month, the government said Tuesday.

This so-called core rate has climbed 6.9% over the past year, unchanged from the prior month.

Big picture: The smaller increase in wholesale inflation is a welcome sign since they tend to foreshadow changes in the prices that consumers pay. Consumer inflation surged in 2021 by 7% and increased at the fastest pace in nearly 40 years.

Yet there’s still plenty of inflationary pressures in the economy and prices are unlikely to relent until later in the year.

Alarmed by the surge in inflation, the Federal Reserve is planning to raise interest rates soon and take other steps to reduce price pressures.

Key details: The cost of services in retail, travel and so forth rose 0.5% in December and accounted for the biggest increase in wholesale prices.

Yet the cost of goods fell 0.4% to mark the first decline since April 2020. Energy prices, mostly oil, sank 3.3%. The wholesale cost of food also slipped 0.6%.

It remains to be seen whether those declines can be sustained, however. Food producers are still experiencing higher costs for feeds, packaging and labor while oil prices could rise again if more people take to the roads.

In another good sign, the cost of partly finished goods fell for the first time since April 2020. And another measure of raw-material prices sank 5.6% — the first decline in eight months.

Market reaction: The Dow Jones Industrial Average DJIA, +0.11% and S&P 500 SPX, +0.28% were set to open higher in Thursday trades. Investors haven’t been rattled by high inflation or the prospect that the Federal Reserve will raise interest rates soon.

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