Wholesale prices rose more than expected in November, indicating persistent inflationary pressures despite ongoing efforts by the Federal Reserve to achieve its 2% target. The producer price index (PPI), which measures price changes at the producer level, increased by 0.4% for the month, exceeding the Dow Jones consensus estimate of 0.2%, according to a Thursday report from the Bureau of Labor Statistics (BLS).
Year-over-year, the PPI climbed 3%, marking its highest annual increase since February 2023. Core PPI, which excludes volatile food and energy prices, rose 0.2% monthly and 3.4% annually, slightly above economists' projections.
The November PPI report follows closely on the heels of the consumer price index (CPI) release, which showed a 3.3% annual rise in core consumer prices for the fourth consecutive month. These data points signal that while inflation has eased from its peak, its decline toward the Fed's goal remains gradual and uneven.
"Producer prices, and the broader inflation complex, are on an extended and bumpy journey to the Fed's goal," said Oren Klachkin, financial markets economist at Nationwide.
The headline PPI increase was largely driven by a 0.7% jump in final-demand goods prices, with food costs surging 3.1%. Notably, chicken eggs skyrocketed by 54.6%, highlighting specific vulnerabilities within the food supply chain. Services prices rose by 0.2%, propelled by a 0.8% increase in trade services.
Labor market data released the same day added to concerns about economic stability. First-time claims for unemployment insurance reached 242,000 for the week ending Dec. 7, significantly higher than the forecasted 220,000 and marking a 17,000 increase from the previous period. Continuing claims also edged up to 1.89 million, the highest level since early October.
The Federal Reserve is widely expected to reduce its benchmark interest rate by 0.25 percentage points at its upcoming Federal Open Market Committee (FOMC) meeting, despite these mixed signals on inflation. Futures markets indicate a near-certainty of the rate cut, underscoring market confidence in the Fed's commitment to supporting economic growth.
However, the data has tempered expectations for aggressive rate cuts in 2025. "The Federal Reserve can feel largely pleased with the progress made on lowering high levels of inflation over the last couple years," said Rick Rieder, BlackRock's global CIO of fixed income. "But the bulk of this progress is behind us now, and inflation may remain stubbornly sticky near current levels for a time."
The Fed relies on the personal consumption expenditures (PCE) price index as its primary inflation gauge, with projections from the Atlanta Fed suggesting a 2.6% rise in November, up from 2.3% in October. Core PCE, which excludes food and energy, is forecasted at 3%, a 0.2 percentage point increase from the previous month.
Economists remain divided on whether the latest inflation data will significantly alter the Fed's trajectory. Kurt Rankin, a senior economist at PNC, noted that only an "exogenous shock, such as dramatic tariff policy shifts," could disrupt the current trend toward the Fed's inflation target.
Markets reacted modestly to the economic updates. Stock futures traded slightly lower, while Treasury yields showed mixed movements.
