Prices at the wholesale level climbed 0.4 per cent in October and 2.8 per cent over the past year, biggest annual jump in more than five years and a sign that an improving economy may finally be reviving inflationary pressures. The 12-month increase was driven by a 7.6 percent jump in energy prices.
USA inflation is rising, at least at the producer level. In September, energy prices had surged, thanks to the impact of Hurricanes Harvey and Irma, but that effect appears to have waned in October.
Tuesday's report from the Labor Department also showed steady gains in underlying producer prices, which supported expectations of a gradual increase in inflation and keep the Federal Reserve on track to raise interest rates in December.
"The PPI does not drive the Fed but policymakers will note the threat to consumer price inflation if PPI inflation continues to rise, as we think likely", Shepherdson said in a client note.
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Meanwhile, services PPI was up 0.5 percent sequentially, owing to trade services that rose 1.1 percent and transport and warehousing that rose 0.8 percent. In the goods category, food prices rose 0.5 percent, while energy prices came in flat after a rise of 3.4 percent in the prior month. It rose by 0.4% in September. Producer prices rose faster than expected in October.
PRoducer prices were expected to rise by 0.1% in October, slower than 0.4% in September (Before revisions). But many economists expect price pressures to rise as the economy improves.
"For the October CPI report, due for release tomorrow, we forecast headline CPI to have increased 0.1 percent m/m (2.0 percent y/y) and core CPI to have increased 0.2 percent m/m (1.7 percent y/y)", added Barclays. The weakening dollar, which has this year lost 5.4 percent of its value against the currencies of the United States' main trading partners, could gradually lift core producer inflation.
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