WASHINGTON — Wholesale costs in the United States rose sharply last month, indicating that price pressures are still evident in the economy even as inflation has fallen from peak levels more than two years ago.
The Labor Department reported Thursday that the producer price index – which tracks inflation before it reaches consumers – rose 0.4% last month from October, up from 0.3% the month before. Compared to twelve months earlier, wholesale prices rose by 3% in November, the strongest year-on-year increase since February 2023.
Higher food prices contributed to the rise in inflation in November, which was higher than economists expected.
Excluding volatile food and energy prices, so-called core producer prices increased by 0.2% compared to October and by 3.4% compared to November 2023.
The wholesale price report comes a day after the government reported it Consumer prices rose 2.7% in November compared to a year earlier, compared to an annual gain of 2.6% in October. The increase, fueled by more expensive used cars, hotel rooms and groceries, showed that high inflation has not yet been fully tamed.
Consumer price inflation has fallen from a four-decade high of 9.1% in June 2022. Despite reaching relatively low levels, it has so far remained stubbornly above the Fed’s 2% target stayed.
Despite the modest rise in inflation last month, the Federal Reserve is poised to cut its key interest rate for the third time in a row next week. In 2022 and 2023, the Fed raised its key short-term interest rate eleven times – to a two-decade high – in an effort to reverse a wave of inflation that followed the economy’s unexpectedly strong recovery from the COVID-19 recession. The steady cooling of inflation prompted the central bank to start reversing that movement from September onwards.
The producer price index released Thursday could provide an early look at where consumer inflation could be heading. Economists are also watching it because some of its components, especially healthcare and financial services, feed into the Fed’s preferred inflation gauge: the personal consumption expenditures (PCE index).