The producer price index, a measure of the prices companies receive for finished goods on the market, rose 0.2% for the month, compared with Dow Jones estimates for a 0.4% increase. Stock futures tied to the Dow Jones industrial average rose more than 400 points shortly after the trade, reflecting the market’s expectation that cost-of-living increases not seen since the early 1980s would recede, if they would not retreat. Year-on-year, the PPI rose 8% compared to an 8.4% increase in September and from a record high of 11.7% in March. The monthly increase is equivalent to September’s gain of 0.2%. Excluding food, energy and trade services, the index also rose 0.2% month-on-month and 5.4% year-on-year. Excluding only food and energy, the index was flat on a monthly basis and rose 6.7% year-on-year. A major contributor to the slowdown in inflation was a 0.1% decline in the services component of the index. This marked the first full decline in this measure since November 2020. Prices of final demand for goods rose 0.6%, the biggest gain since June, which can be traced mainly to the recovery in energy, which saw 5.7% jump in gasoline. The slowdown came despite a 2.7% increase in energy costs and a 0.5% rise in food. The index is generally considered a good leading indicator for inflation, as it measures the prices of pipelines that eventually hit the market. The CPI differs from the more widely followed consumer price index in that the former measures prices received by producers at the wholesale level, while the CPI reflects what consumers actually pay. Hopes that inflation is at least slowing were boosted last week when the CPI rose 0.4% month-on-month, below the 0.6% estimate. The 7.7% annual gain was a slowdown from June’s 41-year high of 9%. Markets also rose after Thursday’s CPI announcement. Federal Reserve officials are raising interest rates in hopes of reducing inflation. The central bank raised its key lending rate six times a year for a total of 3.75 percentage points, the highest level in 14 years. Vice President Lael Brainard said Monday that she expects the pace of increases to slow soon as rates are likely to remain higher. He said the Fed may move to a more “deliberate” stance as it monitors the impact of its rate hikes, which have included four consecutive 0.75 percentage point hikes, on economic conditions. In other economic news Tuesday, the New York Fed’s Empire State Manufacturing Survey for November came in at 4.5%, up 14 percentage points month-on-month and well ahead of the estimate for a -6% reading. The index measures the difference between companies reporting expansion versus contraction. However, both prices paid and figures received showed increases, increasing by 1.9 points and 4.3 points respectively.
