Producer prices came in hotter than expected in November, signaling continued inflationary pressures within the economy, according to the latest data from the Bureau of Labor Statistics.
- The Producer Price Index (PPI) for final demand rose 0.4% for the month, outpacing October’s 0.3% increase and marking the largest monthly gain since June.
- On an annual basis, the PPI climbed to 3.0%, up from October’s 2.6%, reaching its highest level since February 2023.
Goods Rising: This sharp uptick reflects broad-based price increases, but goods led the way over services. Nearly 60% of the overall rise in final demand prices was driven by a 0.7% jump in the index for final demand goods.
- In contrast, prices for final demand services edged up just 0.2% during the month.
Food prices were a particularly significant factor in November’s inflationary momentum. A staggering 3.1% jump in the index for final demand foods accounted for 80% of the broader increase. This comes as rising commodity costs and supply chain constraints continue to impact food prices globally.
- The report mirrors recent trends observed in consumer prices, where goods prices have been a dominant inflationary force, outpacing service-related price increases.
Market reaction to the data was relatively muted, with interest rates edging higher. The yield on the 10-year Treasury note rose by just one basis point, closing just below 4.28%.
Bottom Line: The strong November PPI data reinforces concerns about persistent inflation, particularly in goods-related categories. With inflation still running above the Federal Reserve’s target, you have to wonder if the Fed is making a mistake in continuing to cut rates.
