Producer prices in the U.S. increased much more than expected in November, as did the annual wholesale inflation reading, according to a government report on Tuesday.
The Labor Department’s Producer Price Index (PPI), which measures inflation pressures before they reach the consumer, soared 1.8% in November — the biggest gain in three months. Expectations generally ranged from between 0.8% and 1.0%. October’s PPI advanced 0.3%. (Prices declined 0.6% in September after a 1.7% increase in August.)
"The numbers were a bit higher than expected, and investors are concerned a bit, but the market is not moving too much on it because there is a low possibility that these little tickles of inflation would lead to changes in rates," Keith Springer, president of Capital Financial Advisory Services in Sacramento, California, said on Reuters.
Energy prices at the wholesale level surged 6.9% in November as compared to a 1.6% increase in October and a 2.4% decline in September. Gasoline was a big part of the increase, soaring 14.2% in the month. Energy as a whole accounted for about 75% of November’s PPI increase.
Food prices were less severe, rising 0.5% versus the 1.6% reading from the month prior. Fruits and vegetables led the increase, accounting for over 60% of the rise.
Compared with a year earlier, producer prices moved up 2.4% — their first 12-month increase since November 2008. The annual wholesale inflation rate was 1.9% lower in October.
November’s core producer prices, which excludes more volatile food and energy costs, also climbed more than expected at 0.5% — the biggest increase since October 2008. Core prices retreated 0.6% in October.
On an annual basis, core producer prices rose 1.2%. Same costs were 0.7% higher in October, which was the smallest 12-month gain since March 2004.
The government’s Consumer Price Index (CPI) for October is scheduled to be released on Wednesday at 8:30 AM ET. The CPI measures inflation pressures at the consumer level.