MTS Help Center

FU.S. producer prices soar as supply bottlenecks persist

U.S. producer prices increased more than expected in November as supply constraints persisted, leading to the biggest annual gain since the series was revamped 11 years ago and supporting views that inflation could remain uncomfortably high for some time.

The report from the Labor Department on Tuesday, which also showed strong growth in underlying producer inflation, followed on the heels of news last Friday that annual consumer prices surged by the most since 1982 in November. Soaring inflation complicates President Joe Biden economic agenda, including a $1.75 trillion social policy and climate bill stuck in Congress.

The producer price index for final demand jumped 0.8% last month after advancing 0.6% in October. The broad-based increase in the PPI was led by a 0.7% rise in services, which followed a 0.2% gain in October. The acceleration in services reflected a 2.9% jump in prices for portfolio management.

There were also increases in prices for hotel and motel accommodation as well as airline fares and transportation of freight and mail. But prices for wholesale furnishings and bundled wired telecommunications access services fell.

In the 12 months through November, the PPI shot up 9.6%. That was the largest gain since November 2010 and followed an 8.8% increase in October. Economists polled by Reuters had forecast the PPI climbing 0.5% on a monthly basis and surging 9.2% year-on-year.

Excluding the volatile food, energy and trade services components, producer prices surged 0.7%. The so-called core PPI gained 0.4% in October. In the 12 months through November, the core PPI jumped 6.9%, the largest rise since 12-month data were first calculated in August 2014, after marching 6.3% in October.

The Fed tracks the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, for its flexible 2% inflation target.

Portfolio management prices, hotel and motel accommodation as well as airline fares go into the calculation of the core PCE price index. With these data and CPI numbers in hand, economists are forecasting that the core PCE price index rose at least 0.4% in November. That would lift the year-on-year increase in the core PCE price index to about 4.6%, which would the strongest annual reading since 1989.

The core PCE price index accelerated 4.1% in the 12 months through October, the most since January 1991. Data for November will be released next Thursday.

Reference: Reuters