Wholesale Inflation Drops in December

Core inflation, however, grew 0.3% last month.

January 18, 2012

The wholesale inflation rate declined 0.1% in December, led by a 1.1% decline in raw material costs, a 0.8% drop in finished goods, and a 0.5% decrease in intermediate materials and supplies, according to Brian Turner, director of advisory services for Catalyst Strategic Solutions, citing Labor Department statistics.

Over the past 12 months, wholesale inflation has increased at a 4.8% pace, less than the 5.7% pace in November.

Core inflation (which excludes food and energy prices) increased 0.3% last month—the largest monthly gain since July 2011, Turner says.

Over the past 12 months, core prices have increased 3% percent, the largest increase since June 2009.

“Wholesale inflation continues to outpace the rate of consumer inflation as producers find it nearly impossible to pass on their higher costs to a retail sector whose demand remains stagnant at best,” Turner says. “This has led to the protracted weakness in manufacturing employment where companies have no choice but to trim payrolls to assemble some sense of profitability.”

Consumer inflation is expected to show a slight increase in December when the report is released Thursday.

For the 12 months ended in November, consumer prices have increased at a 3.4% annual pace, and core inflation has grown 2.2%.