The Economy

Producer Prices Increase 0.4% in November

The producer price index was up 3.1% in the 12 months through November — the biggest increase since January 2012.
Matthew HellerDecember 13, 2017

U.S. producer prices posted the biggest annual gain in six years in November, a possible sign that inflation is picking up steam after weakness through the first half of the year.

The Labor Department said its producer price index for final demand increased 0.4% last month after identical gains in September and October. In the 12 months through November, the PPI rose 3.1% — the biggest increase since January 2012.

Economists had forecast the PPI gaining 0.3% last month and accelerating 2.9% from a year ago.

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The November gain was driven by a 15.8% surge in gasoline prices, the biggest gain since August 2009, after a 4.6% drop in October. The so-called core CPI — producer prices excluding food, energy and trade services — also rose 0.4% last month.

“This demand-led price push from higher commodity prices is a classic early warning signal that consumer goods will also see increasing inflationary pressures,” Chris Rupkey, chief economist at MUFG in New York, told Reuters.

Weak inflation readings through the first half of the year had prompted concerns among some Federal Reserve officials that pressures holding down inflation could become more persistent. The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has missed the central bank’s 2% target for nearly 5-1/2 years.

“The pickup over the year will be welcomed by the Fed as an indication that inflation is gradually moving up,” said Sarah House, an economist at Wells Fargo Securities.

Inflation data to be released on Wednesday are expected to show the consumer price index rising 0.4% percent in November after edging up 0.1% in October. The core CPI is seen rising 0.2% for a second straight month.

There were also increases in November in the prices of light motor trucks, pharmaceutical preparations, beef, residential electricity and jet fuel. Wholesale food prices rose 0.3% after increasing 0.5% in October and prices for services gained 0.2% following a 0.5% gain in October.

Core goods climbed 0.3% in November, rising by the same margin for a third consecutive month.