Wholesale prices in the United States ticked higher in October, with the producer price index (PPI) rising 0.2% from the previous month, aligning with market expectations, according to the Bureau of Labor Statistics' latest report released on Thursday. The uptick, which follows a 0.1% increase in September, highlights the ongoing but moderating inflationary pressures within the American economy as markets and policymakers alike brace for potential implications under the incoming Trump administration.
On a year-over-year basis, wholesale prices registered a 2.4% increase, marking a slight acceleration from September's 1.9%. Core PPI, which excludes the more volatile categories of food and energy, rose 0.3% for the month and 3.1% over the past year, also meeting economists' forecasts. While these readings remain above the Federal Reserve's preferred 2% inflation target, they reflect a general trend of easing price pressures that have persisted since inflation peaked in mid-2022.
Driving much of the increase was a 0.3% rise in services, notably led by a 3.6% surge in portfolio management prices. Meanwhile, goods prices edged up just 0.1% after declining in the prior two months. Food prices fell by 0.2%, and energy prices slipped by 0.3%.
Markets reacted with caution to the data, with stock futures showing a mixed response and Treasury yields holding steady. The CME Group's FedWatch tool suggested a 76.1% probability of another quarter-point rate cut at the Federal Reserve's December meeting, following cuts in September and November. The outlook beyond that remains uncertain, particularly given the political shift from President Joe Biden to President-elect Donald Trump.
Trump's recent electoral victory has injected a degree of unpredictability into the inflation outlook. He has pledged to combat high prices through measures such as expanding domestic oil and gas drilling but has also proposed policies, like imposing tariffs on imports and deporting undocumented immigrants, that many mainstream economists view as inflationary. With the GOP now in control of both the White House and the Senate, the markets are on edge over how these policies might reshape the economic landscape.
The Labor Department's concurrent report on unemployment claims painted a stable labor market picture. Initial jobless claims fell by 4,000 to 217,000 for the week ending November 9, with continuing claims dropping to 1.873 million, signaling a continued recovery in the employment sector.
"The latest data on wholesale prices reinforce the view that inflation, while persistent in certain sectors, is largely under control," said Stephen Brown, an economist at Capital Economics. However, Brown cautioned that rising costs in areas like healthcare and investment fees could push up the core PCE index, the Federal Reserve's preferred inflation gauge. He noted, "This uptick alone is unlikely to deter the Fed from a December rate cut."
The PPI data arrives against the backdrop of a shifting economic narrative. Inflation initially surged in 2021 as the economy roared back from the pandemic-induced recession, straining supply chains and labor availability. The Federal Reserve responded with 11 rate hikes across 2022 and 2023, pushing borrowing costs to their highest levels in over two decades. Despite fears of an impending recession, the U.S. economy has remained resilient, with steady growth and continued job creation.
Yet, the transition to a Trump administration has injected new questions into the economic outlook. Trump's combative rhetoric on trade and immigration, coupled with promises to reduce regulatory burdens, could alter the Fed's path and broader market dynamics. While Federal Reserve Chair Jerome Powell and his colleagues have pivoted toward rate cuts in response to slowing inflation, the coming months could bring new challenges as the central bank seeks to balance economic growth and price stability.
