U.S. Producer Prices Rose Robustly in November -- Update

By Sarah ChaneyFeaturesDow Jones Newswires

A gauge of U.S. business prices rose across a broad range of goods and services in November, a signal of building price pressures at a time when inflation has remained puzzlingly low.

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

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Producer prices rose 0.4% in November for the third consecutive month. Energy prices, which grew 4.6% last month, boosted the overall month-over-month rise in producer prices. Even when excluding food and energy and a volatile category known as trade services, prices businesses charged were up 0.4% in November from a month earlier.

"The most striking thing to me about the November PPI is the increases were very widespread," said Stephen Stanley, chief economist at Amherst Pierpont Securities. "The PPI numbers definitely suggest we may be turning a corner."

November saw price gains in areas including food, light motor trucks and airfares. That might portend some pickup in certain consumer price categories in the coming months.

Producer price inflation has continued to strengthen since hitting a recent low of a 1.9% year-over-year increase in June. Rising oil prices and improved global demand have helped push up the index this year.

Producer prices don't necessarily directly translate into what consumers pay, but in general, PPI readings follow the same trends as other major inflation gauges, which have remained subdued this year.

The Federal Reserve's preferred inflation gauge rose 1.6% in October from a year earlier, according to the Commerce Department. That annual inflation reading has remained below the Fed's 2% target for the best part of 5 1/2 years.

Fed officials are likely to raise their benchmark short-term rate Wednesday by a quarter-percentage point to a range between 1.25% and 1.5%, but low inflation readings could complicate officials' decisions on how quickly to raise interest rates in 2018 and beyond.

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

Write to Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

December 12, 2017 11:51 ET (16:51 GMT)