In an incrementally dovish development, US producer prices were flat last month from October, data released ahead of Wednesday’s FOMC meeting showed.
The unchanged read on the final demand gauge was in line with expectations. The range of estimates from more than four-dozen economists was -0.2% to +0.2%.
Recall that the headline PPI gauge fell the most since April of 2020 in October as initially reported. That decline (0.5%) was revised to show a slightly smaller drop.
Generally speaking, the trajectory is favorable for the disinflation narrative. Notably, the ex-food and energy gauge (as distinct from the ex-food, energy and trade index) undershot meaningfully, printing flat versus expectations for a 0.2% increase.
Both the goods and services gauges were likewise unchanged in November from the prior month. On the goods side, another drop on the energy index offset a 0.6% increase on a measure of food. Egg prices rose 59%, while indexes for fresh fruit, natural gas and electricity all rose. But that’s “fine” because the gas measure dropped more than 4%. The unchanged read on the services index was the second in a row.
On a YoY basis, the headline gauge rose just 0.9% in November. That was the slowest since June, and the second-coolest read since December of 2020.
The read-through for consumer price growth is encouraging — ostensibly, anyway, although it’s fair to suggest that the decline in energy prices isn’t to be trusted given the vagaries of the oil market.
I doubt there are any groundbreaking revelations to be gleaned from parsing Wednesday’s update, particularly given it’s sandwiched between CPI and the FOMC meeting. As noted here at the outset, you could plausibly suggest the release was a small win for doves. At the least, it was a welcome development in the context of uncomfortably warm reads on key “supercore” measures of consumer price growth.
Finally, I’d be remiss not mention that some equity bears view cooler PPI readings as a bad omen for revenue growth. There’s always a bear market somewhere.
