Washington (AP) Although inflation has fallen from its peak levels over two years ago, wholesale costs in the US increased significantly last month, indicating that price pressures are still present in the economy.
On Thursday, the Labor Department announced that its producer pricing index, which measures inflation before it affects consumers, increased 0.4% from October to the previous month from 0.3%. Wholesale prices increased 3% in November compared to a year earlier, marking the biggest annual increase since February 2023.
The November wholesale inflation reading was higher than economists had predicted, in part due to rising food prices.
So-called core producer prices increased 3.4% from November 2023 and 0.2% from October 2023, excluding volatile food and energy prices.
The government said that consumer prices increased 2.7% in November compared to the same month last year, up from an annual gain of 2.6% in October. The wholesale pricing report was released the day following that. The rise, which was driven by higher prices for groceries, hotels, and used cars, demonstrated that high inflation has not yet been completely controlled.
In June 2022, consumer price inflation hit a four-decade peak of 9.1%, but it has since fallen sharply. However, it has so far consistently stayed above the Fed’s 2% target even though it has dropped to relatively low levels.
The Federal Reserve is set to lower its benchmark interest rate for the third time in a row next week, despite the little increases in inflation last month. Following the economy’s surprisingly robust recovery from the COVID-19 recession, the Fed attempted to stop an inflationary spike by raising its key short-term rate 11 times to a two-decade high in 2022 and 2023. Beginning in September, the central bank started to reverse that approach as a result of the inflation rate steadily declining.
An early indication of the potential direction of consumer inflation can be found in the producer price index, which was reported on Thursday. Because some of its components—most notably healthcare and financial services—feed into the Fed’s favored inflation indicator, the personal consumption expenditures, or PCE, index, economists also keep an eye on it.
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