Cancel any weekend PPI parties you had planned.
Producer prices in the US rose more than expected last month, closely-watched data out Friday showed. The figures felt ominous ahead of next week’s crucial CPI report and FOMC meeting.
The headline gauge rose 7.4% YoY, ahead of the 7.2% economists expected (figure below).
Excluding food and energy, the 12-month print was 6.2%, easily higher than the 5.9% forecasters saw. Stripping out trade, core rose 4.9% YoY.
On a MoM basis, the headline index moved up 0.3%, matching the highest estimate. October’s print was revised up.
Although the monthly pace is obviously nowhere near that witnessed early in 2022, the deceleration seen over the summer has given way to three consecutive 0.3% monthly increases (figure below).
The monthly ex-food and energy print, at 0.4%, was double consensus (and ahead of every estimate), while the ex-trade print, at 0.3%, tripled forecasts.
The breakdown showed final demand services prices rose 0.4%, the most since August, led by an 11.3% increase in prices for (somewhat amusingly) investment advice and broker services. Indexes for passenger transport, autos retailing and traveler accommodations all fell.
On the goods side, the foods gauge notched a 3.3% monthly increase, the third largest MoM jump on record (figure below). The energy index fell by the same amount from October.
You can blame vegetables, in part anyway. A gauge of fresh and dry veggies rose 38%. It’s a volatile series (to put it politely). I won’t venture any sort of analysis. I’m sure there are experts somewhere. Prices for eggs, meats and poultry all moved higher.
A 6% drop in the gasoline gauge helped temper the overall goods gauge, which rose just 0.1% from October. Excluding food and energy, goods prices rose 0.3%, the largest monthly increase since June.
The problem with these kinds of reports is that in the era of hair-trigger algos and hyper-sensitivity to Fed shifts, any nuance is doomed to be lost in the panicked rush to trade the implications for monetary policy. To the extent monetary policy takes account of the nuance (e.g., a 0.4% drop in retail trade services versus October’s 0.7% increase), that’s tragically ironic, because market pricing is also an input into monetary policy decisions, much as officials probably wish it weren’t on some days.
With that in mind, the read-through was straightforward. “It was a stronger read on prices that will leave the market cautious on a similar outcome next week when we see the consumer price update,” BMO’s Ian Lyngen said.
