US Producer Price Index increases higher-than-expected in Nov

The latest print of the US PPI in November sparks hope of a slower pace in interest rate hikes by US Federal Reserves in the upcoming policy next week.

The report comes ahead of US inflation data for November month scheduled on December 13. Also, ahead of the FOMC meeting that will be held from December 13-14. In October, US inflation slowed for the fourth consecutive month at 7.7%– the lowest level since January this year. To tame multi-decadal high inflation, FOMC made a fourth 75 basis points hike in policy rates to 3.25-4% from earlier 3-3.25% in the last policy.

However, in FOMC minutes that were released last month, the policymakers hinted towards slowing the pace of increase soon.

Further, according to BLS data, in November, most of the increase in the index for final demand is attributable to a 0.4% upside in prices for final demand services. Leading the November increase, prices for final demand services less trade, transportation, and warehousing climbed 0.4%. Margins for final demand trade services rose 0.7%. In contrast, prices for final demand transportation and warehousing services contracted 0.9%.

Meanwhile, the index for final demand goods edged up 0.1%. BLS report stated that a 3.3% increase in prices for final-demand foods was a major factor in the November advance. Also, the index for final demand goods less foods and energy moved up 0.3%, however, the prices for final energy declined 3.3%.

Further, the prices for final demand less foods, energy, and trade services moved up 0.3% in November after rising 0.2% in October. For the 12 months that ended in November, the index for final demand less foods, energy, and trade services increased 4.9%.

According to BLS, about one-third of the November rise in the index for final demand services can be traced to prices for securities brokerage, dealing, investment advice, and related services, which jumped 11.3%. Also, the indexes for machinery and vehicle wholesaling, loan services (partial), fuels and lubricants retailing, portfolio management, and long-distance motor carrying witnessed an upside. However, the prices for transportation of passengers (partial) dropped 5.6%, while downside was also seen in automobile and automobile parts retailing and for traveller accommodation services.

However, the Trading Economics data stated that compared to November last year, producer prices were up 7.4% in November 2022 — the smallest increase since May last year, but higher than expectations of 7.2%.