WASHINGTON- US producer prices were unexpectedly unchanged in November amid cheaper energy goods, and underlying inflation pressures at the factory gate were muted.
The report from the Labor Department on Wednesday, which also showed services prices flat for a second straight month, strengthened optimism that overall inflation would continue to subside and allow the Federal Reserve to start cutting interest rates next year.
The US central bank held rates steady on Wednesday and signaled in new economic projections that the historic tightening of monetary policy engineered over the last two years is at an end and lower borrowing costs are coming in 2024.
Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 percent -5.50 percent range.
“The good news today is that there are minimal price increases at the lower stages of factory production,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
“This makes it even more likely they (Fed officials) will bring inflation down for a ‘soft-landing’ without bringing the economy to its knees.”
The unchanged reading in the producer price index for final demand in November reported by the Labor Department’s Bureau of Labor Statistics followed a revised 0.4 percent drop in October.
Economists polled by Reuters had forecast the PPI gaining 0.1 percent last month. Goods prices were unchanged in November as a 1.2 percent decline in the cost of energy products was offset by a 0.6 percent rebound in food prices. Goods prices dropped 1.4 percent in October.
Food prices, which had dipped 0.1 percent in October, were last month boosted by a 58.8 percent surge in wholesale prices of eggs. Cases of avian flu on commercial farms are on the rise, hitting large egg-laying operations in states like Kansas and Ohio.
Prices for fresh fruits and melons also rose.
Energy costs were pulled down by a 4.1 percent decline in gasoline prices, as well as cheaper jet fuel and liquefied petroleum gas. Energy prices fell 6.7 percent in October.
In the 12 months through November, the PPI rose 0.9 percent after advancing 1.2 percent in October. Data on Tuesday showed consumer prices edged up in November amid stubbornly high rental costs. – Reuters
