The Bureau of Labor Statistics reported Thursday that a measure of wholesale prices rose more than expected in November as questions mounted about whether progress in lowering inflation has slowed.
The Producer Price Index, or PPI, which measures what producers get for their products at the final demand stage, rose 0.4% during the month, higher than the Dow Jones consensus estimate of 0.2%. On an annual basis, the producer price index rose 3%, the largest advance since February 2023.
However, excluding food and energy, the core Producer Price Index rose 0.2%, in line with expectations. The introduction of commercial services also left the Producer Price Index rise at just 0.1%. The year-on-year increase of 3.5% was the largest since February 2023.
In other economic news Thursday, the Labor Department reported first-time claims for unemployment insurance totaled a seasonally adjusted 242,000 for the week ending Dec. 7, well above expectations of 220,000 and up 17,000 from the prior period.
On the inflation front, the news was mixed.
Prices of goods according to final demand jumped 0.7% on a monthly basis, the largest movement since February this year. About 80% of the move came from a 3.1% rise in food prices, according to the Bureau of Labor Statistics.
In the food category, chicken eggs rose by 54.6%, joining the overall acceleration in items such as dry vegetables, fresh fruits and poultry. Egg prices at the retail level swelled 8.2% month over month and were up 37.5% from a year ago, the Bureau of Labor Statistics said in a separate report Wednesday on consumer prices.
Services costs rose 0.2%, driven by a 0.8% rise in trade.
The PPI release comes one day after the Bureau of Labor Statistics announced that the Consumer Price Index, or CPI, a widely cited measure of inflation, also rose in November to 2.7% on a 12-month basis and 0.3% on Monthly basis.
Despite the seemingly stubborn inflation situation, markets overwhelmingly expect the Fed to cut its key overnight borrowing rate next week. Futures market traders point to near certainty of a quarter-point cut when the interest-rate-setting Federal Open Market Committee concludes its meeting on Wednesday.
Following the release, economists generally viewed this week's data as mostly benign, with fundamental indicators still pointing to enough of a decline in inflation to eventually return the Fed to its 2% target.
The Fed uses the Commerce Department's personal consumption expenditures price index, or PCE, as its main measure of inflation and forecasting tool. However, data from the Consumer Price Index and Producer Price Index feed into this measure.
The Atlanta Fed's tracker puts November's PCE rate at 2.6%, up 0.3 percentage points from October, and core PCE at 3%, up 0.2 percentage points. The Fed generally considers the fundamental indicator better over the long term. A few economists said the details in the report point to a smaller monthly rise in personal consumption expenditures inflation than previously expected.
“Only an external shock such as dramatic shifts in tariff policy appears capable of derailing supply-side contributions toward a return of inflation to the Fed’s average target of 2.0% in the near term,” wrote Kurt Rankin, chief economist at the PNC. .
Stock market futures were in slightly negative territory following the economic news. Treasury yields were mixed while the odds of a rate cut next week remain around 98%, according to CME Group.
One reason markets expect the Fed to cut interest rates, even in the face of stubborn inflation, is that Fed officials have become more concerned about the labor market. Nonfarm payrolls have posted gains each month since December 2020, but increases have slowed recently, and Thursday brought news that layoffs may increase as unemployment persists longer.
Jobless claims hit their highest level since early October, while continuing claims, which were delayed by a week, rose to 1.89 million. The four-week moving average of continuing claims, which smoothes out weekly volatility, rose to its highest level in just over four years.
