Data from the U.S. Bureau of Labor Statistics showed that the U.S. Producer Price Index (PPI) rose 3% year-over-year in November, exceeding the expectation of 2.7%. The monthly PPI increased by 0.2%, matching forecasts.
The core PPI for November, which excludes food and energy, also came in at 3% annually, higher than the anticipated 2.7%, while the monthly core PPI was unchanged at 0%, compared to an expected rise of 0.20%.
U.S. wholesale inflation saw a modest monthly uptick in November, primarily driven by rising energy costs, while service prices held steady. This report included the first estimate for October's wholesale prices, a release that had been delayed due to the 43-day federal government shutdown.
Following a report on Tuesday which indicated that December's core Consumer Price Index (CPI) was lower than expected, suggesting a cooling price trend, the latest PPI figures further illustrate that businesses remain restrained in passing higher import tariffs and other costs on to consumers, likely due to concerns that excessive price hikes could dampen sales.
The index for final demand goods jumped 0.9% in November, marking the largest increase since a similar 0.9% rise in February 2024. Over 80% of this November increase was attributable to a 4.6% surge in prices for final demand energy.
The index for final demand goods excluding food and energy rose by 0.2%, while prices for final demand foods were unchanged. More than half of the increase in the final demand goods index was due to a significant 10.5% leap in gasoline prices.
Economists and investors monitor the PPI closely because several of its components feed into the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index.
Within these categories, portfolio management fees increased by 1.4%, whereas the cost of airline passenger services declined by 2.6%. Hospital inpatient care and outpatient care costs saw slight increases, with outpatient care registering a larger rise.
After a 0.3% increase in October, the cost of services remained flat in November. A key measure of profit margins declined by 0.8% in both October and November.
The less volatile PPI measure, which excludes food, energy, and trade services, increased by 0.2%.
U.S. officials are scheduled to release the November PCE price data, along with income and spending figures, on January 22. The following week, Federal Reserve officials will convene for their first policy meeting of 2026.
Having already implemented three consecutive interest rate cuts, Fed officials are widely expected to hold rates steady at this meeting, as they await further progress on inflation and assess developments in the labor market.
Following the data release, market expectations have solidified around two interest rate cuts for the year, with the first reduction anticipated in June, currently assigned a probability of approximately 47.8%.
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