Producer prices experienced a more significant increase than Wall Street's forecasts last month, with wholesale costs of goods rising notably due to a surge in food prices, as reported by the Bureau of Labor Statistics on Thursday. The US producer price index rose 0.4% month over month on a seasonally adjusted basis in November, surpassing the 0.2% consensus estimate from Bloomberg polls.
The reading from October was also revised up to 0.3%. The index for final demand goods witnessed a growth of 0.7% in November, marking the largest increase since February. This is in contrast to a mere 0.1% rise observed in October. Service prices also rose by 0.2%, continuing a trend with four consecutive readings above zero; however, this represented a deceleration compared to the three preceding readings. When analyzing goods, energy costs elevated by 0.2% last month, following a 0.1% increase in October.
Conversely, food costs surged to 3.1% after showing no change in October. The headline index, excluding food, energy, and trade services, increased by 0.1% in November, slowing from October's 0.3% rise and falling short of analysts' expectations of a 0.2% increase. "Goods prices were the driver of the upside surprise, with an unlikely-to-be-sustained rise in food prices pushing the headline index higher," Matthew Martin, a senior economist at Oxford Economics, remarked in email comments to MT Newswires. In terms of year-over-year changes, producer prices increased by 3% in November, exceeding the anticipated 2.6% gain.
The final demand energy index, however, fell by 6.2%, while food prices saw an uptick of 5.1%. Despite the positive surprise in the headline PPI, the report’s specifics bolster the argument for another 25 basis-point cut by the Federal Reserve next week, according to Martin. Just a day prior, the BLS disclosed that consumer inflation matched market forecasts last month on both sequential and annual levels. "Our tracking estimate for the personal consumption expenditure deflator, which incorporates the CPI and PPI as source data, suggests that the headline PCE deflator rose by 0.17%, with the core PCE deflator increasing by 0.16%," he added..