The Producer Price Index, or wholesale prices, rose at a seasonally adjusted rate of 1.4 percent in January, mainly due to a rise in energy costs, pharmaceutical costs and light trucks, the U.S. Bureau of Labor Statistics reported today.

This increase followed a 0.4 percent rise in December and [...]]]>  

The Producer Price Index, or wholesale prices, rose at a seasonally adjusted rate of 1.4 percent in January, mainly due to a rise in energy costs, pharmaceutical costs and light trucks, the U.S. Bureau of Labor Statistics reported today.

This increase followed a 0.4 percent rise in December and a 1.5 percent rise in November.

Analysts forecast a 0.8 percent increase in January wholesale prices, according to the median of 75 predictions in a Bloomberg LP survey.

So what does this mean for us?

The PPI measures the prices of goods before they reach store shelves and it is considered the first measure of inflation each month, followed by the Consumer Price Index released Friday. Luckily, we do not need to worry about inflation at this point.

“There is so much slack in our economy with the high unemployment and subdued labor costs,” said Richard DeKaser, president of Woodley Park Research. “That tells me that we shouldn’t see any big increase in inflation anytime soon.”

A main cause for the increase in the PPI was the rise of energy prices and food prices, partially because of the abnormally cold January, DeKaser said. Meat prices increased by 3 percent in January. Energy, meanwhile, rose 5.1 percent in January, its fourth consecutive monthly increase, according to the report. A majority of the energy increase can be attributed to an 11.5 percent jump in gasoline prices.

“The increase in energy prices affects consumer confidence,” DeKaser explained. “This will drain discretionary income. Whatever is spent at the pump will not be spent elsewhere.”

The core index, which excludes energy and food, rose 0.3 percent in January, led by higher prices for light trucks and airplanes, according to the report. Pharmaceutical prices jumped 1.3 percent as well.

DeKaser speculated that the rise in drug costs could be because congressional health reform has been derailed.

“In 2009 drugs prices showed a slowing, possibly because of the ongoing health-care reform debate,” DeKaser said. “Pharmaceutical companies could have raised prices due to the idea that regulation may not be put into place any time soon.”