U.S. PPI rises firmly in December, likely to strengthen gradually and feed through to consumer prices

U.S. producer prices rose robustly in December, underpinned by increasing prices of food and energy. The nation’s headline PPI accelerated 0.3 percent sequentially, consistent with consensus projection. Stripping energy, food and trade, PPI rose modestly by 0.1 percent in sequential terms. The goods component of PPI was up 0.7 percent, the fourth straight monthly rise with widespread support from energy, food and other categories.

Services PPI was up modestly by 0.1 percent sequentially, as s fall in transport and warehousing prices countered rises in trade and other, noted Barclays in a research report. The yearly change in PPI stabilized around neutral levels in early 2016 and has rebounded considerably since last summer, rising 1.6 percent year-on-year in December. Final demand, stripping food, trade services and energy rose 1.7 percent year-on-year, as compared with the prior month’s reading of 1.8 percent.

PPI personal consumption was up 0.2 percent sequentially, whereas it rose 1.6 percent year-on-year. Stripping energy and food, PPI personal consumption remained flat on a sequential basis and rose 1.4 percent year-on-year. In all, the report provides additional evidence of continued progress towards more robust pipeline pressures stimulated by upbeat energy base effects and a recovery in food prices in recent months. As the drag from volatile components fade, PPI is expected to gradually strengthen and feed through to consumer prices, added Barclays.

At 05:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -131.692. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex