(CN) – Rising energy costs nudged up American wholesale prices only slightly in December, a sign that inflation pressures remain tame.
The producer price index, a key gauge of inflation that measures costs before they reach the consumer marketplace, rose just 0.1% last month, according to a Labor Department report released Wednesday.
Wholesale inflation over the past year increased 1.3% in December, but that’s down significantly from the 2.6% gain in 2018. The 12-month increase last year was the lowest since the end of 2015.
Excluding the volatile food, energy and trade categories, so-called core wholesale prices also ticked up 0.1% last month and were up 1.5% across all of 2019, compared to 2.8% the year before.
Wholesale energy costs surged 1.5% in December as gasoline prices rose 3.7%. Offsetting that increase was a 0.2% drop in food costs, pulled down by lower beef prices.
On Tuesday, the Labor Department similarly reported the consumer price index – which measures what American shoppers pay for a wide range of products – went up 0.2% in December, driven up by a 2.8% jump in gas prices. The overall consumer price index increased 2.3% in 2019.
Not counting food and energy, core consumer prices increased by a modest 0.1% last month and are also up 2.3% from a year ago.
The 12-month inflation numbers for wholesale prices are still below the Federal Reserve’s 2% annual target, a trend that has persisted for years. The central bank slashed its key interest rate three times in 2019, in part because of the low inflation pressures and President Donald Trump’s trade war with China.
Joel Naroff of Naroff Economic Advisors said that consumer inflation seems to be “running at a pace near the Fed’s target.”
“With the Fed happy with its position on interest rates, we have to ask what could knock it off its stand,” he wrote. “They could hike rates if inflation or growth accelerates sharply or even reduce rates further if the opposite occurs.”
But he expressed concern about smaller gains in consumer purchasing power, pointing to lower wage increases.
“Real hourly earnings fell in December and the gain was well under 1% over the year,” Naroff said. “It is hard for the average household to keep up the spending we have seen if their spending power is going nowhere.”