Wholesale costs in the United States saw a notable increase last month, indicating that inflationary pressures continue to persist in the economy, despite a decline from previous peak levels over two years ago. The latest data from the Labor Department revealed that the producer price index, which tracks inflation before it impacts consumers, rose by 0.4% in November, up from 0.3% in October. Year-over-year, wholesale prices surged by 3% in November, marking the most substantial annual rise since February 2023.
One of the key drivers behind the November wholesale inflation uptick was higher food prices, surpassing economists' expectations. Excluding volatile food and energy prices, core producer prices also experienced a 0.2% increase from October and a 3.4% rise from November 2023.
These findings come on the heels of a recent report indicating a 2.7% year-over-year increase in consumer prices for November, up from 2.6% in October. The uptick in consumer prices was fueled by higher costs for used cars, hotel accommodations, and groceries, underscoring that inflation remains elevated and not yet fully subdued.
While consumer inflation has significantly decreased from its peak of 9.1% in June 2022, it continues to hover above the Federal Reserve's 2% target. Despite the recent modest increases in inflation, the Federal Reserve is expected to lower its benchmark interest rate for the third consecutive time next week.
In response to an inflationary surge following a robust recovery from the COVID-19 recession, the Fed had raised its key short-term rate 11 times between 2022 and 2023, reaching a two-decade high. However, with inflation showing signs of cooling, the central bank began reversing this trend in September.
The producer price index, released on Thursday, serves as an early indicator of potential consumer inflation trends. Economists closely monitor this index, as certain components such as healthcare and financial services feed into the Fed's preferred inflation measure, the personal consumption expenditures (PCE) index.
