Wholesale prices rose 0.2% in October, less than expected, as inflation slows

Wholesale prices rose less than expected in October, adding to hopes inflation is easing, the Bureau of Labor Statistics reported Tuesday.

The Commodity Price Index, a measure of the prices companies get for finished goods in the market, rose 0.2% for the month, versus Dow Jones estimates for a 0.4% increase.

Stock futures tied to the Dow Jones Industrial Average rose more than 400 points shortly after the release, reflecting market anticipation that increases in the cost of living not seen since the early 1980s attenuated, even receded. However, market gains dwindled during the day as the Dow gained just over 100 points late in the session.

Year-over-year, the PPI rose 8%, compared to an increase of 8.4% in September and after the all-time high of 11.7% reached in March. The monthly increase matched September’s gain of 0.2%.

Excluding food, energy and trade in services, the index also rose by 0.2% over the month and 5.4% over the year. Excluding only food and energy, the index remained stable over the month and increased by 6.7% over the year.

“The PPI reading certainly adds more fuel to the fire for those who think we might finally be on a downward trend in inflation,” said Mike Loewengart, head of model portfolio construction at Global Investment. Morgan Stanley office.

A major contributor to the slowdown in inflation was the 0.1% decline in the services component of the index. This is the first outright decline in this measure since November 2020. Prices for final demand for goods rose 0.6%, the largest increase since June, mainly due to the rebound in energy, which saw a 5.7% jump in gasoline.

The deceleration occurred despite a 2.7% increase in energy costs and a 0.5% increase in food.

Inflation soared during the pandemic era as supply chains couldn’t keep up with superheated demand for expensive and durable items, especially those reliant on semiconductors. Economists generally expect inflation to have at least plateaued, although many risks loom on the horizon, including a possible railway strike which could put further pressure on the chains. supply.

The producer index is generally considered a good leading indicator of inflation, as it gauges the prices of pipelines that eventually end up in the market. The PPI differs from the most widely followed consumer price index because the former measures the prices producers receive at the wholesale level, while the CPI reflects what consumers actually pay.

Hopes that inflation would at least slow peaked last week when the CPI posted a monthly gain of 0.4%, below the 0.6% estimate. The 7.7% annual gain was a deceleration from a 9% high in 41 years in June. Markets also soared after the CPI was released on Thursday.

Federal Reserve officials raised interest rates in hopes of lowering inflation. The central bank has raised its benchmark borrowing rate six times a year for a total of 3.75 percentage points, its highest level in 14 years.

On Tuesday afternoon, markets were pricing in a roughly 80% chance that the Fed would scale back its rate hikes in December, rising 0.5 percentage points after four straight moves of 0.75 percentage points.

Vice President Lael Brainard said Monday that she expects the pace of increases to slow soon, with rates likely to rise further. She said the Fed could take a more “deliberate” stance as it watches the impact of its rate hikes.

In other economic news on Tuesday, the New York Fed’s Empire State Manufacturing Survey for November recorded a reading of 4.5%, up 14 percentage points on a monthly basis and much better than the estimate for a -6% reading. The index measures the difference between companies reporting an expansion versus a contraction.

However, the components of prices paid and received increased, increasing by 1.9 points and 4.3 points respectively.

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