Wholesale inflation rises faster than expected in November as high prices persist
Producer price index projected to rise 7.2% in November
Baird investment strategy analyst Ross Mayfield says markets are trying to find 'a place that makes sense' heading into a 'slow' 2023.
Inflation at the wholesale level rose more than expected in November, underscoring the stickiness of high consumer prices in the economy and raising pressure on the Federal Reserve to continue hiking interest rates.
The Labor Department said Friday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, rose 0.3% in November from the previous month. On an annual basis, prices soared 7.4%. That is down from the 8% reading recorded in October and marks the lowest reading since May 2021.
Still, those figures were both higher than the 7.2% headline figure and 0.2% monthly gain forecast by Refinitiv economists, a worrisome sign for the Federal Reserve as it seeks to cool price gains and tame consumer demand with the most aggressive interest rate hike campaign since the 1980s.
Excluding food and energy, core inflation increased 0.4% for the month — higher than the 0.2% estimate. Over the past 12 months, core prices climbed 6.2%, compared with 6.6% in October.
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Stocks fell following the surprisingly hot report as investor hopes dimmed that inflation would cool off soon.
"Month-over-month PPI rising slightly and coming in just over expectations is yet another reminder of how sticky inflation is and that it will take time before we see it normalize," said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. "Though keep in mind compared to where we were a year ago, we are in a better place and headed in the right direction."
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 44722.06 | -138.25 | -0.31% |
| I:COMP | NASDAQ COMPOSITE INDEX | 19060.475899 | -115.10 | -0.60% |
| SP500 | S&P 500 | 5998.74 | -22.89 | -0.38% |
Services inflation accelerated in November, climbing 0.4% after rising just 0.1% in October. The bulk of the increase – about one-third – stemmed from an 11.3% jump in the prices for securities brokerage, dealing, investment advice and related services. The cost of machinery and vehicle wholesaling, loan services and portfolio management also rose in November.
Goods inflation rose just 0.1% last month after surging 0.6% in October. The slight increase came despite a 38.1% monthly jump in prices for fresh and dry vegetables. Prices for other food items including eggs and meats also climbed higher in November, the Labor Department said. However, the cost of gasoline tumbled 6% last month, while the cost of diesel fuel and natural gas also dropped.
Workers deliver packages in Manhattan on December 02, 2022 in New York City. ((Photo by Spencer Platt/Getty Images) / Getty Images)
These numbers come just a few days before the Labor Department reports the consumer price index, which measures the prices paid directly by consumers.
The CPI, which will be released next Tuesday at 8:30 a.m. ET, is expected to be another doozy: Economists surveyed by Refinitiv anticipate that inflation rose 7.8% in November, up slightly from the 7.7% in October.
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Both data releases are considered to be important measurements of inflation, with the PPI believed to be a good leading indicator of inflationary pressures as costs work their way down to consumers.