US Producer Prices Announce Biggest Annual Gain in 6 years

US producer prices increased in November leading to the largest annual gain posted in nearly six years. The rise follows gasoline prices surge as well as an increase in the cost of other goods.

chart with levels going up and down

The Labor Department posted the report on Tuesday. It suggested that there’s a broad acceleration in wholesale price pressures. These pressures can lessen Fed concerns over continuously low inflation.

According to the aforementioned report, the Labor Department’s producer price index for final demand rose 0.4 percent last month. This result stayed in the same margin for three straight months.

The Producer Price Index (PPI) shot up 3.1 percent the 12 months leading to November. This was its biggest gain since January 2012, following a 2.8 percent increase in October.

Economist forecast for the PPI was at a rise of 0.3 percent last month and 2.9 percent increase from last year.

An important gauge of underlying producer price pressures which excludes food, energy, and trade services increased by 0.4 percent last month. The supposed core PPI rose 0.2 percent for two straight months. It increased by 2.4 percent in the 12 months leading to November which follows a gain of 2.3 percent in October. The PPI’s largest gain since it began in August 2014.

PPI Analysis

USD advanced against a basket of currencies after the report while US Treasuries prices dropped. US stock index futures traded slightly higher.

The extensive rise in the PPI backs up the assessments that weak inflation readings experienced through the first half of the year have probably passed. Some Fed officials were worried that the factors which held down inflation during the early months of 2017 might become increasingly persistent.

The Fed officials were set for a 2-day policy meeting this week. The US central bank is predicted to raise interest rates on Wednesday, the third time this year. It’s also expected to overshadow policymakers’ earlier concerns regarding tame inflation as the market and economy begin to strengthen.

Gasoline prices surged 15.8 percent last month, which is its biggest gain since August 2009, following a drop of 4.6 percent in October. Gasoline accounted for two-thirds of the 1.0 percent increase in the final demand goods index.

Wholesale food prices rose 0.3 percent in November after October’s 0.5 percent increase. Prices for services rose 0.2 percent last month following a 0.5 percent increase in October.

Core goods rose 0.3 percent in November. Prices for passenger cars climbed 0.5 percent last month after staying untouched in October.

Cost for healthcare services remained untouched in November after it rose 0.3 percent in October.

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