Wholesale prices in October were lower than expected, adding to expectations that inflation is weakening, the Bureau of Labor Statistics reported Tuesday.
The Agricultural Prices Index, which measures the price at which businesses buy finished goods on the market, rose 0.2% for the month, compared with a 0.4% rise forecast by Dow Jones.
Related investment news
Stock futures tracking the Dow Jones Industrial Average rose more than 400 points immediately after the announcement. This reflects market expectations that the rise in the cost of living, which has not been seen since the early 1980s, is easing, if not reversing. But the market gains tapered off throughout his day, with the Dow up just over 100 points late in the session.
On a year-over-year basis, PPI rose 8% compared to September’s 8.4% increase, off the all-time high of March’s hit of 11.7%. The monthly increase matched his September gain of 0.2%.
Excluding food, energy and trade services, the index rose 0.2% m/m and 5.4% y/y. Excluding food and energy alone, the index was flat last month and rose 6.7% for the year.
“The PPI reading is a sure fire for those feeling that the inflation trend is finally on the downside,” said Mike Lowengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office. We are pouring oil on the
One of the major contributors to the slowdown in inflation was the 0.1% drop in the services component of the index. This was the first full drop since November 2020. Final demand prices for commodities rose his 0.6%, the biggest rise since June. This is mainly due to a recovery in energy, where gasoline rose by 5.7% on him.
The slowdown came despite a 2.7% increase in energy costs and a 0.5% increase in food.
Inflation skyrocketed during the pandemic because supply chains were unable to meet overheated demand for long-term, big-ticket items, especially those dependent on semiconductors. Economists generally expect inflation to at least plateau, although many risks are looming, including a possible rail strike that could put new pressures on supply chains.
The Producer Index is generally considered a good leading indicator of inflation as it measures the price of the pipeline that finally hits the market. The PPI reflects what consumers actually pay, whereas the CPI measures the price producers receive at the wholesale level, so it differs from the more widely tracked consumer price index.
Hopes that inflation is at least slowing soared last week when the CPI showed a monthly gain of 0.4%, below estimates of 0.6%. The 7.7% annualized rise was a slowdown from his 9% in June, which was his 41-year peak. Markets also surged following his CPI announcement on Thursday.
The Federal Reserve has been raising interest rates in hopes of keeping inflation down. The central bank raised its benchmark borrowing rate six times a year, reaching a total of 3.75 percentage points. This is his highest standard in 14 years.
The market on Tuesday afternoon priced in a roughly 80% chance of a downshift by the Fed in December, gaining 0.5ppt after four straight gains of 0.75ppt.
Vice Chairman Rael Brainard said on Monday that he expects the pace of rate hikes to slow soon, but that the slew rate is still likely to rise. She said the Fed could move to a more “cautious” stance as it closely monitors the impact of rate hikes.
In other economic news on Tuesday, the New York Fed’s November Empire State manufacturing survey recorded a reading of 4.5%, up 14 percentage points on a month-to-month basis, well above estimates for a reading of -6%. Excellent. This index measures the difference between companies reporting growth and contraction.
However, the prices of parts paid and parts received both increased, up 1.9 points and 4.3 points respectively.
