The latest numbers on wholesale inflation are in, and they’re higher than expected. The Bureau of Labor Statistics reported that the producer price index (PPI) rose 3% in November compared to the same time last year. This is up from October’s 2.4% increase and above the 2.6% increase economists had predicted.
What’s driving this surge in inflation? The answer lies in the details. Excluding food and energy, “core” prices increased 3.4% year-over-year. This is higher than October’s 3.1% increase and above economist expectations.
Average Consumer Costs for US
I ran avereages of grocery staples for all US cities as of 12/12/2024. Here’s the data.
If you compare to 2014, we’re up less than 10% for inflation overall.
However, if you compare to 2021, that’s when we feel the pressure. It’s almost a 20% increase from 2021 low prices.
That’s the news. Inflation is up, but only after a strong decline from 2016-2021.
Include in my averages:
- Series Title: Flour, white, all purpose, per lb. (453.6 gm) in U.S. city average, average price, not seasonally adjusted
- Area: U.S. city average
- Items: Eggs, Whole Wheat bread, Milk, Ribeye Steaks, Flour, white, all purpose, per lb. (453.6 gm)
PPI and Consumer Price Index News
So, what does this mean for the economy?
According to Nationwide financial markets economist Oren Klachkin, “PPI isn’t so scary once you get past the headline.” While the numbers don’t suggest a new inflation surge, they also don’t indicate a quick drop to the Federal Reserve’s 2% target.
In fact, the latest consumer price index (CPI) reading showed core inflation rose 3.3% for the fourth straight month. This “sticky” nature of inflation has prompted investors to anticipate fewer Fed rate cuts in 2025.
As BlackRock global CIO of fixed income Rick Rieder noted, “The Federal Reserve can feel largely pleased with the progress made on lowering high levels of inflation over the last couple years. But the bulk of this progress is behind us now, and inflation may remain stubbornly sticky near current levels for a time.”
What’s next?
The Federal Reserve meets next week, and investors are watching closely to see if they’ll cut interest rates again. While some economists expect a rate cut, others are less certain. One thing is clear, however: the journey to 2% inflation will be “extended and bumpy.”
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