U.S Wholesale Prices Rise in November

Wholesale prices in the U.S. rose from a year earlier by the most since 2014 as food costs and retail margins increased, helping bring inflation closer to the Federal Reserve’s goal.

The producer-price index gained 1.3 percent in the 12 months through November, a Labor Department report showed Wednesday in Washington. The gauge rose 0.4 percent from October, the most since June and more than the median estimate of economists for a 0.1 percent rise.

The figures affirm a pickup in inflation as Fed officials meet in Washington, where they are widely anticipated to raise interest rates later Wednesday for the first time in a year. Price pressures stirring in the production pipeline may potentially feed through to faster increases in the cost of living for Americans.

The year-over-year gain was the most since November 2014 and compared with the 0.9 percent median estimate of economists surveyed by Bloomberg.

Projections for the monthly change in producer prices ranged from a decline of 0.1 percent to an advance of 0.3 percent, according to the Bloomberg survey.

Energy costs fell 0.3 percent from the prior month as gasoline dropped 2.9 percent. Food prices showed a 0.6 percent increase, led by jumps in the prices of fresh fruits and melons, and beef and veal.

Excluding food and energy, wholesale prices rose 0.4 percent from the previous month following a 0.2 percent drop. Those costs increased 1.6 percent from November 2015.

Retail Margins

Profit margins rose 4.2 percent at retailers of apparel, jewelry, footwear and accessories, the most since 2014 and accounting for a quarter of the November increase in prices for final demand services, according to the Labor Department. Margins gained 9.9 percent at sellers of fuels and lubricants, the fastest rate since June.

Excluding volatile components such as food, energy, and also eliminating trade services, producer costs rose 0.2 percent after falling 0.1 percent the previous month. Some economists prefer this reading because it strips out the most volatile components of PPI. Compared with a year earlier, this core measure increased 1.8 percent, the most since August 2014, after a 1.6 percent gain.

One key takeaway from the report was the increase in health care prices that are used to calculate the Commerce Department’s consumer spending inflation index, the Fed’s preferred price measure. Those costs rose 0.2 percent in October from the prior month, before adjusting for seasonal variations.

The producer price gauge is one of three monthly inflation reports released by the Labor Department this week. A report Tuesday showed import prices fell from the previous month by the most since February, led by cheaper fuel. A separate report on consumer prices will be released on Thursday.

The Fed targets 2 percent annual increases in the Commerce Department’s personal consumption expenditures price index.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell