Producer Prices Grew 0.4% in November

Producer Prices Grew 0.4% in November

The producer-price index for final demand, which measures changes in the prices that USA companies receive, advanced 3.1% in November from a year earlier, the biggest jump in almost six years, the Labor Department said Tuesday.

The Labor Department's report on the consumer-price index arrives Wednesday, with economists expecting a 0.4% monthly increase for the inflation measure.

Rising oil prices and improved global demand have helped push up the index this year.

As a result, the annual increase in the core CPI slowed to 1.7% in November from 1.8% in October. That was the biggest gain since January 2012 and followed a 2.8 per cent rise in October. In the 12 months through November, the price of doctor visits fell 1.8%, the biggest decline since records started in 1947.

"The report is certainly not weak enough to stop the Fed from tightening today, but it could result in the tone of the statement being slightly less hawkish than it would have been with a consensus-like reading", said Jim O'Sullivan, chief USA economist at High Frequency Economics in Valhalla, New York.

The broad rise in producer prices supports views that weak inflation readings experienced through the first half of the year probably were temporary.

The Fed officials were due to gather for a two-day policy meeting starting later yesterday.

The news comes as the Federal Reserve is poised to raise interest rates later tonight, the third rate hike of the year. It was the biggest annual jump in almost six years and reflected a big spike in the price of gasoline and other energy products. That annual inflation reading has remained below the Fed's 2% target for the best part of 5 ½ years.

Inflation data today is expected to show the consumer price index rising 0.4 per cent in November after nudging up 0.1 per cent in October, according to a Reuters survey. The core CPI is seen rising 0.2% for a second straight month.

The index for final demand goods advanced 1.0% in November, the fourth consecutive increase.

There were also increases in November in the prices of light motor trucks, pharmaceutical preparations, beef, residential electricity and jet fuel.

Overall, food costs rose a modest 0.3 percent after a bigger 0.5 percent gain in October.

Most of last month's increase was driven by energy prices which rose 3.9%, as the price of petrol at the pump surged 7.3% compared to October.

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