Rising food prices to blame for Producer Price Index increase
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Wholesale prices rose at a quicker pace in November, the latest evidence following Wednesday's CPI report that inflation is no longer cooling.
By the numbers: The Producer Price Index rose 0.4%, the biggest monthly gain since this summer. The index increased 3% in the 12 months through November, the largest increase since February 2023.
- A pickup in goods prices — largely for food — accounts for almost 60% of the index's monthly increase.
- Among the goods with the sharpest price increases: chicken eggs, which rose 55% in November alone. Prices for vegetables, melons, poultry and residential electricity also jumped.
Yes, but: Key PPI components that feed into calculations of the Fed's preferred measure of inflation, including portfolio management fees and hospital care, saw slower price gains or fell outright.
- Economists now anticipate that November's Personal Consumption Expenditures Price Index, to be released next Friday, will be better than previously thought.
- Both Morgan Stanley and Bank of America now estimate core PCE, which excludes food and energy costs, rose just 0.1% — a slowdown from the 0.3% increase in the previous two months.
What they're saying: "If our forecast proves correct, it would be a relief and leave us less worried about the recent trajectory of inflation," BofA economists Stephen Juneau and Aditya Bhave wrote in a note Thursday morning.
- "That said, the outlook beyond that remains murky," they add. "Progress on inflation has stalled of late, and there are upside risks to inflation on the horizon."
