The Producer Price Index (PPI), which measures inflation on the wholesale level, rose 0.4% in November, which was double the estimate of a 0.2% rise. The annual reading jumped from an upwardly revised 2.6% to 3%, much hotter than the 2.6% that the market was anticipating. Core PPI, which strips out volatile food and energy prices, rose 0.2% for the month and the year-over-year reading held steady at an upwardly revised 3.4%.
What’s the bottom line?
While the stalling progress on inflation has caused some fears that it is reemerging, we need to look at the numbers in context. November’s 3% year-over-year PPI reading is well below the peak of 11.7% seen in 2022. Plus, a spike in prices for chicken eggs (+55%) and fruits and vegetables (+31%) accounted for half of the monthly overall headline inflation reading, which would have been in line with estimates otherwise.
Still, PPI data is important because some of the components are factored into another inflation measure called Personal Consumption Expenditures (PCE). We will need to see if these PPI readings cause an upside surprise to PCE when it is reported on December 20.