Wholesale inflation remained stubbornly higher in November
By Alicia Wallace, CNN
(CNN) — Price hikes picked up speed for US-based businesses toward the end of last year, a potential signal that inflation has yet to peak and prices could soon rise faster for consumers.
US wholesale inflation picked up speed in November, pushed higher in part by fast-rising energy prices, according to shutdown-delayed data released Wednesday.
The latest Producer Price Index report showed that prices rose 0.2% in November from the month before, resulting in an annual rate of 3%, according to the Bureau of Labor Statistics.
Wednesday’s data also showed that wholesalers and retailers were likely continuing to pick up most of the hefty tab resulting from President Donald Trump’s sweeping and steep tariffs on imported goods.
“Retailers are shielding consumers from further big increases in goods prices triggered by the tariffs,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, wrote in a note to investors Wednesday.
PPI, which measures the average change in prices that producers receive for their goods and services, serves as a potential bellwether for what consumers may see in the months ahead.
As was the case with other major economic reports that relied on data collected during the shutdown, the BLS did not release a separate PPI report for October because the 43-day federal shutdown hampered statistical agencies’ operations.
However, unlike those reports, the PPI was able to include fuller data for October – only the price-update requests and submissions were delayed, BLS officials wrote in a note accompanying the report.
In October, falling energy prices resulted in a softer overall reading: Producer prices rose 0.1% from September and were up 2.8% annually.
Wednesday’s report also showed that wholesale inflation was hotter than previously thought in September. The annual rate was revised higher to 3% from 2.7%.
When excluding food and energy, categories that can have abnormal price shifts, core PPI rose 0.3% in October and prices were flat in November; however, the annual rates firmed to 2.9% in October and 3% in November.
The latest PPI also provided a potential glimpse at how businesses are navigating higher costs that they’re paying because of President Donald Trump’s sweeping tariffs on imported goods.
Trade services, which measures profit margins for wholesalers and retailers, were down by 0.8% in both October and November, a possible indication that businesses were absorbing higher costs versus fully passing them along to customers.
As the labor market has weakened, wage growth has slowed, and economic disparities have grown wider, some businesses have sought to cut prices – versus raising them further – because a wider swath of Americans is struggling with affordability.
When excluding food, energy as well as trade services – which also can be volatile – the underlying trajectory of wholesale inflation was even more concerning: Prices shot 0.7% higher in October and rose 0.2% in November, lifting the annual rate to 3.4% in October and then 3.5% in November.
That’s the highest annual rate for PPI excluding energy, food and trade services in eight months.
“Premature declarations of a peak in tariff-related inflation look rather unconvincing after parsing the data,” Joe Brusuelas, RSM US chief economist, wrote in an email to CNN.
The latest PPI report offers some signals for the Federal Reserve’s preferred inflation gauge, as several PPI data points feed in to the Personal Consumption Expenditures price index.
The CPI data during the fourth quarter and the latest PPI data point to the PCE price index edging further from the Fed’s 2% target rate, Pantheon’s Tombs wrote.
The October and November PCE report, which also will include the latest data on spending, is scheduled to be released Thursday, January 22.
The December PPI report is scheduled for release on January 30.
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