The Economy

Producer Price Index Rises 0.6% in October

Wholesale prices were up 2.9% year-to-year but other inflation measures appear to have leveled off around the Fed's 2% target.
Matthew HellerNovember 9, 2018

U.S. wholesale prices jumped in October to their biggest gain in six years but overall inflation pressures remain moderate.

The Labor Department reported Friday that the producer price index rose 0.6% in October, after a 0.2% increase in September. Economists polled by MarketWatch had expected a 0.2% gain last month.

For the 12 months ended in October, producer prices were up 2.9% from 2.6% the prior month.

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But according to CNBC, the numbers “suggest inflation pressures are mostly in check. The year-over-year price increase is lower than it was in the summer, when it topped 3 percent. And oil prices declined in October, which will likely to lower gas costs in the coming months.”

Excluding the volatile food and energy categories, core wholesale prices rose 0.5% in October and 2.6% from a year earlier.

“Inflation is unquestionably higher than it was a year or two ago, but price pressures appear to have paused lately,” MarketWatch said.

“Although wholesale prices are running close to a 3% annual pace, other inflation measures that better reflect what households and businesses pay have leveled off around 2%,” it added. “That’s precisely where the Federal Reserve would like them to stay.”

The Fed has been steadily raising interest rates to keep inflation from getting out of hand. Policymakers finished a meeting Thursday without hiking rates again, issuing a statement that suggested it saw little sign that inflation would accelerate beyond its 2 % target.

Friday’s report showed that wholesale gas prices rose 7.6% in October and food costs increased 1%. There was also a notable increase in the wholesale cost of machinery, equipment, parts and other industrial supplies that companies rely on, a possible indication that both strong demand and U.S. tariffs on products such as steel are raising costs for business.

“A growing number of economists think overall inflation will creep above 2% in the next year owing to strong U.S. growth, an uber-tight labor market that’s pushing up wages and the effect of tariffs,” MarketWatch said.

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