Wholesale prices rose more than expected in November, the Bureau of Labor Statistics said Thursday, amid growing doubts that progress in curbing inflation was slowing.
The producer price index (PPI), which measures the amount of money producers earn from their products at the final demand stage, rose 0.4% over the month, beating the Dow Jones consensus estimate of 0.2%. On an annual basis, PPI rose 3%, the largest increase since February 2023.
However, the core PPI, which excludes food and energy, rose 0.2%, meeting expectations. Furthermore, the PPI increase rate excluding trade services was only 0.1%. The year-on-year growth rate was also 3.5%, the largest since February 2023.
In other economic news on Thursday, the Labor Department reported new jobless claims for the week ending Dec. 7 at a seasonally adjusted 242,000, well above expectations of 220,000 and an increase of 1,000 from the previous quarter. It was announced that the number of cases has increased by 7,000.
On inflation, the news was mixed.
Final demand goods prices rose 0.7% from the same month, marking the largest increase since February of this year. About 80% of this change was due to a 3.1% increase in food prices, according to the BLS.
In the food sector, eggs soared 54.6%, joining the overall acceleration in items such as dried vegetables, fresh fruit and poultry. A separate report on consumer prices released by the BLS on Wednesday said retail egg prices rose 8.2% month-over-month and 37.5% year-over-year.
Service costs rose 0.2%, boosted by a 0.8% increase in trade value.
The PPI announcement came a day after the BLS reported that the Consumer Price Index (CPI), a more widely cited inflation measure, also rose 2.7% on a 12-month basis in November, or 0.3% month over month. .
Despite the seemingly stubborn inflation situation, markets overwhelmingly expect the US Federal Reserve to lower its key overnight borrowing rate next week. Futures traders are hinting that a quarter-point cut is almost certain when the Federal Open Market Committee, which sets interest rates, adjourns on Wednesday.
Following the announcement, economists generally said this week’s data was largely benign, with underlying indicators still suggesting inflation has fallen enough for the Fed to eventually return to its 2% target. showed.
The Federal Reserve uses the Commerce Department’s Personal Consumption Expenditures Price Index (PCE) as its primary inflation indicator and forecasting tool. However, data from the CPI and PPI is reflected in that measurement.
According to a tracker by the Atlanta Fed, PCE in November was 2.6%, up 0.3 percentage points from October, and core PCE was 3%, up 0.2 percentage points. The Fed generally believes that core is a better long-term indicator. Several economists said the report’s details showed the monthly rise in PCE inflation was smaller than previously expected.
“Tariffs could derail supply-side contributions to returning inflation to the Fed’s average target of 2.0% in the near term,” said Kurt Rankin, senior economist at PNC. “It appears to be just an exogenous shock, such as a dramatic shift in policy.”
Stock market futures fell slightly into negative territory following the economic news. U.S. Treasury yields were mixed, with the probability of a rate cut next week remaining at around 98%, according to CME Group.
One reason the market expects the Fed to cut rates even with stubborn inflation is that Fed officials are increasingly concerned about the labor market. Nonfarm payrolls have increased every month since December 2020, but the rate of increase has slowed in recent days, and layoffs could increase on Thursday as unemployment lasts longer. The news broke.
While the number of unemployment insurance claims hit the highest level since early October, the number of continuing claims rose slightly to 1.89 million, one week later. The four-week moving average of continuing claims, which smoothes out weekly fluctuations, rose to its highest level in more than four years.
