Data released by the US Department of Labor on Friday (9) showed that the annual and monthly growth rates of the producer price index (PPI) in November rose to 7.4% and 0.3%, both exceeding market expectations of 7.2% and 0.2%. Furthermore, the core PPI growth rate also increased significantly, indicating that inflationary pressure is still there and needs time to ease. This pressure could allow the Federal Reserve (Fed) to continue raising interest rates Next year.
According to the data, US PPI rose 7.4% in November, higher than an expected 7.2%. The previous value was revised upwards from 8% to 8.1%. The previous reading is been revised up to 0.3% from 0.2%.
After excluding food and energy volatiles, core PPI rose 6.2% year-on-year in November, higher than 5.9% expected, previous value was revised up from 6.7% to 6.8 %, while core PPI increased by 0.4%. in November, higher than expected by 0.2% compared to the previous value of 0.1%.
After the US PPI growth rate peaked at 11.7% in March this year, as US domestic and foreign demand cooled down to ease the pressure on the supply chain and energy prices fell to a new low since February this year, PPI growth rate slowed in November but still outpaces the market Showing inflation resilience is expected to allow policy to continue Fed monetary tightening.
food prices go up
Overall, the increase in food prices was the main reason for the increase in PPI in November: the vegetable index increased by 38.1%, and the vegetable index excluding potatoes increased by 43. 1%, in addition, eggs, meat and tobacco products also increased. Conversely, the gasoline index fell 6%, while the prices of diesel, domestic natural gas and emergency basic organic chemicals also declined.
Service charges increase at fastest rate in 3 months
It is worth noting that the cost of services rose 0.4% in November, the largest increase in three months, among which the increase in the cost of securities has become a major driver, and about a third of the increase is attributable to the prices of securities brokerage, trading and other related services, related to securities services increased by 11.3 percent.
Indices also rose for wholesale of machinery and vehicles, cash services, retail sales of fuels and lubricants, portfolio management and long-distance road haulage. Conversely, some passenger transportation prices fell by 5.6%, while sales of automobiles and auto parts and passenger accommodation services also declined.
Inflation of intermediate raw materials slows down
Commodity prices increased by 0.1%, driven by rising food costs. The cost of processed goods for intermediate demand fell for the fifth consecutive month, with the decline in the price of energy commodities such as diesel being a major factor, indicating that cost pressures continued to ease and subsequent PPI data could weaken further.
The Fed’s dogged inflation-tightening policy may continue
Foreign media analysis showed that although the PPI is slowing down, it is still at its peak and the market should not expect the Fed to stop raising interest rates in a short period of time. Economists expect the Fed to keep interest rates relatively high next year, dashing market expectations that the Fed will raise interest rates in the second half of the year and could push the US economy into a recession.
Fed Chairman Powell once said that even in a weak economy, it will take longer to keep interest rates high to reduce inflation, and he doesn’t want to make the mistake of weakening prematurely in the process of fighting inflation. inflation. The Fed made this mistake in the 1970s and 1980s, fueling inflation so high that the Fed was only able to bring it down by triggering a severe recession.
Powell said last month that the pace of interest rate hikes could be moderated next time, suggesting a 2-yard (50 basis point) rate hike is possible, but he also stressed that what matters now is the final rate and the decision to keep rates within a restrictive range.
