Wholesale prices rose more than expected in November as food prices soared, dampening hopes that inflation could ease, the Labor Department reported Friday.
The Producer Price Index, a measure of how companies buy products in the pipeline, increased by 0.3% over the month and increased by 7.4% from a year ago. This was the slowest pace in 12 months since May 2021. Economists surveyed by Dow Jones expect a rise of 0.2%.
Excluding food and energy, core PPI rose 0.4%, also up against an estimated 0.2%. Core PPI was up 6.2% from a year ago, compared to 6.6% in October.
The stock fell following the report after previously showing a positive opening on Wall Street. Government bond yields rose.
Markets will now turn their attention to the more closely watched consumer price index due Tuesday morning. The next day, the Federal Reserve will end his two-day meeting and announce where interest rates are headed.
High inflation data puts the Fed on track for the next rate hike. A rate hike of perhaps 0.5% would push the benchmark borrowing rate into the target range of 4.25% to 4.5%. After more than a decade of near stagnation, policymakers have been raising interest rates to quell the stubborn inflation that has set in over the past 18 months.
“The monthly rise in producer prices shows that, albeit at a slower pace, tightening should continue,” said Jeffrey Roach, chief economist at LPL Financial. Consumer prices will slowly approach the Fed’s long-term target.”
In other economic news on Friday, the University of Michigan Consumer Confidence Index was higher than expected, recording 59.1 against Dow Jones estimates of 56.5, down from November’s 56.8. Inflation expectations for the year also fell, falling to 4.6%, 0.3 points below his one month ago.
Wholesale inventories rose 0.5% in October, below expectations of 0.8%.
The PPI report was the market’s biggest focus, but consumer sentiment polls showed optimism on inflation.
Services inflation accelerated this month, rising 0.4% from 0.1% the previous month. A third of that profit came from the financial services industry, where prices rose his 11.3%. This was somewhat offset by a sharp decline in passenger transport costs, which fell by 5.6%.
On the commodity side, the index rose just 0.1%, down sharply from a 0.6% gain in October. The rise was slight, even though prices for fresh and dried vegetables rose by 38.1%. Prices rose in multiple food categories despite a 6% drop in the gasoline index.
Roach said the surge in the food price index “is likely to be an anomaly and does not necessarily reflect a change in trend.”
The announcement comes amid other signs that inflation is at least decelerating from the pace that has driven inflation to its highest level in more than 40 years. Friday’s data showed that shaking off inflation could be a long way off.
A year ago, the headline PPI was up 1% in a month and 10% on a 12-month basis.
“The slightly higher MPM PPI, slightly higher than expected, shows how persistent inflation is and how long it takes to normalize,” said Mike Loewengart, head of global model portfolio construction at Morgan Stanley. It reminds me again of what it takes,” he said. investment office. “Keep in mind that we are in a better place than we were a year ago and we are heading in the right direction.”
It was the third month in a row that the headline PPI increased by 0.3%. On an annual basis, the increase represents a decline from his peak hit of 11.7% in March, but at least he’s well ahead of his pre-pandemic pace, if we go back to 2010.
This increase came despite a 3.3% decrease in final demand energy costs. This was offset by the same he 3.3% increase in the food index. The trade index rose by 0.7%, while transportation and warehousing fell by 0.9%.
Excluding food, energy and trade services, the PPI rose 0.3% from a month ago and rose 4.9% on an annual basis to its lowest level since April 2021.
