According to a Labor Department report, wholesale inflation experienced a resurgence during January. This was due to producer prices rising more than expected at the start of the year. The 0.7% increase in the Producer Price Index (PPI), a measure of how much raw materials fetch on the open marketplace, was the largest gain since June.
U.S. PPI Declines To 6%
Dow Jones polled economists and predicted that the index would rise 0.4% in January after a 0.2% drop in December. When food and energy were removed, the core PPI rose by 0.5%. This was much higher than the 0.3% increase that was expected. Core excluding trade services saw a 0.6% increase, which was significantly more than the 0.2% projection.

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Analysts believe that January’s inflation rate spike was caused by a combination payback from previous months with more moderate price increases and seasonal factors. An unusually mild winter may have also played a role, as the already volatile fuel price continued to rise throughout January.

Market Reaction
The stock market plunged within minutes of the announcement. This also had an impact on the crypto market. The Dow Jones Industrial Average fell 284 points, or 0.83%. The declines in the S&P 500 as well as the Nasdaq Composite were 1.40%, 1.12% and respectively.
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The total market capitalization of the crypto market, currently at $1.10 trillion, also saw a slight decrease. The Bitcoin (BTC), currently trading at $24,400, saw its price drop by 0.6% over the past hour. The Ethereum (ETH) price also saw a drop by 0.30%, while major altcoins like Dogecoin, Cardano (ADA), and Solana(SOL) lost a few points.

Market participants closely monitor the PPI as a measure for wholesale inflation. It is considered a leading indicator due to the fact that producers often pass higher prices on to their customers. The Federal Reserve is also awaiting the announcement on PPI. It is still weighing how many rate hikes it will need before it stops.
Also read: U.S. SEC’s new rule to affect Coinbase and other crypto exchanges

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