The data released by the U.S. Department of Labor on Friday (9th) showed that the producer price index (PPI) annual and monthly growth rates in November rose to 7.4% and 0.3%, both higher than market expectations of 7.2% and 0.2%. In addition, the core PPI growth rate has also increased significantly, indicating that inflationary pressure is still there and needs time to ease. This pressure may allow the Federal Reserve (Fed) to continue raising interest rates next year.
According to the data, the PPI in the United States increased by 7.4% in November, which was higher than the expected 7.2%. The previous value was revised up from 8% to 8.1%. The previous reading was revised up to 0.3% from 0.2%.
After excluding the volatile food and energy, the core PPI rose 6.2% year-on-year in November, higher than the expected 5.9%, the previous value was revised up from 6.7% to 6.8%, while the core PPI increased by 0.4% in November, higher than expected 0.2% of the previous value of 0.1%.
After the U.S. PPI growth rate reached a peak of 11.7% in March this year, as domestic and foreign demand in the U.S. cooled to reduce supply chain pressure and energy prices fell to a new low since February this year, the PPI growth rate in November has slowed down, but it still exceeds the market It is expected that showing the tenacity of inflation may allow the Fed’s monetary tightening policy to continue.
food prices soar
Overall, soaring food prices were the main reason for the rise in PPI in November. The vegetable index rose by 38.1%, and the vegetable index except potatoes rose by 43.1%. In addition, eggs, meat, and tobacco products also rose. Conversely, the gasoline index fell 6 percent, while prices for diesel, domestic natural gas and emergency basic organic chemicals also fell.
Service costs rise at biggest pace in 3 months
It is worth noting that the cost of services rose to 0.4% in November, the largest increase in three months, among which the rise in securities costs became an important driver, and regarding one-third of the increase can be attributed to the prices of securities brokerage, trading and other related services , related to securities services rose 11.3 percent.
Indexes for machinery and vehicle wholesale, cashier services, fuel and lubricant retail, portfolio management and long-distance motor transport were also higher. Conversely, some passenger transport prices fell 5.6 percent, while the sales of automobiles and auto parts and passenger accommodation services also fell.
Intermediate commodity inflation slows
Commodity prices edged up 0.1%, driven by higher food costs. The cost of processed goods for intermediate demand fell for the fifth consecutive month, among which the decline in the price of energy commodities such as diesel fuel was an important factor, indicating that cost pressures continued to ease, and subsequent PPI data may weaken further.
Inflation stubborn Fed tightening policy may continue
Foreign media analysis pointed out that although PPI is slowing down, it is still at its peak, and the market should not expect the Fed to pause raising interest rates in a short period of time. Economists predict that the Fed will maintain interest rates at a relatively high level next year, breaking the market’s expectations for the Fed to raise interest rates in the second half of the year, and may push the US economy into recession.
Fed Chairman Powell once said that even in a weak economy, it will take longer to maintain high interest rates to reduce inflation, and he does not want to make the mistake of softening prematurely in the process of fighting inflation. The Fed made this mistake in the 1970s and 1980s, fueling inflation so high that the Fed might only bring inflation down by triggering a severe recession.
Powell said last month that the pace of interest rate hikes might be moderated next time, suggesting a 2-yard (50 basis point) rate increase is possible, but he also emphasized that what matters now is the end-point rate and the decision to keep rates within a restrictive range. time.
