South By North Strategies, Ltd.

The seasonally-adjusted prices received by producers of finished goods rose by 0.2 percent in December, according to data released recently by the U.S. Bureau of Labor Statistics. That same month, the prices received by sellers of intermediate goods rose by 0.5 percent, and the prices received by sellers of crude goods advanced by one percent.

Price increases for finished goods were driven primarily by rises in consumer food prices. At the earlier stages of production, various combinations of increases in food and energy prices accounted for most of the changes in prices. When energy and food prices are excluded, producer prices for finished goods were unchanged in December. Absent energy and food costs, producer prices rose slightly for intermediate goods and rose sharply slightly for crude ones.

Over the past year, producer prices have risen. Unadjusted prices for finished goods have grown by 4.4 percent, and producer prices for intermediate and crude goods have risen by 3 percent and 12.3 percent, respectively.

The new data offer two insights into the state of the American economy. First, the findings suggest that demand for good and services remains weak, though not quite as weak as in recent months.  Second, the report indicates that inflation is not currently a threat to the larger economy.