US Producer Prices See Uptick in October, Fueled by Portfolio Management Costs
The latest data from the Bureau of Labor Statistics reveals a 0.2% increase in the producer price index (PPI) for final demand in October, driven in part by gains in portfolio management costs and other categories that influence the Federal Reserve’s preferred inflation gauge.
Inflation Concerns Persist
Despite price pressures easing this year, the lack of progress in recent months and the looming threat of higher tariffs under the incoming administration have introduced uncertainty around the path of inflation and interest rates. According to Jeffrey Roach, chief economist for LPL Financial, “We should expect a bit more volatility in producer prices, especially as businesses manage supply chains amid the risk of tariffs.”
Wholesale Inflation Data
The PPI data follows the more closely watched consumer price index, which showed underlying inflation remaining stubborn for a third month. A measure of producer prices excluding volatile food and energy categories climbed 0.3% and 3.1% from a year ago.
Economists Weigh In
Economists closely examine the PPI data for categories that feed into the Fed’s preferred inflation measure, the personal consumption expenditures price index. One such category is portfolio management fees, which track the stock market and surged 3.6%, the most in six months. This has led some economists to revise their forecasts for core PCE inflation upwards to 0.3%, suggesting an annual rate above the Fed’s 2% target.
Other Key Findings
The report also highlighted increases in airfares, health care categories, and machinery and vehicle wholesaling margins, as well as cable and satellite subscriber services. Prices of goods, excluding food and energy, were also 0.3% higher. However, declines in wholesale food and energy prices tempered the overall gain in PPI.
Fed Chair to Speak
Fed Chair Jerome Powell is scheduled to address the economic outlook later today, providing further insight into the central bank’s stance on inflation and interest rates. The personal consumption expenditures price index report is due out on November 27.
Labor Market Remains Strong
In a separate report, applications for US unemployment benefits fell to the lowest level since May last week, indicating a healthy demand for workers despite recent storms and strikes. This has led to a decrease in US Treasury yields and a slight increase in the S&P 500 index.
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