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U.S. producer prices rose in November on advances in foods and transportation services, while a measure of underlying costs accelerated, offering some potential signs of inflation pressures bubbling up in the economy.
The producer-price index advanced 0.1 percent from October, cooling from a rise that was the fastest in six years, Labor Department data showed Tuesday. The annual gain slowed to 2.5 percent from 2.9 percent. The Bloomberg survey median estimates called for no change from the prior month and a 2.5 percent annual increase.
Recent oil price declines weighed on headline producer prices in November. Yet, the underlying fundamentals point to firming inflationary pressures in the service sector, according to Tim Mahedy and Carl Riccadonna of Bloomberg Economics. This supports the FOMC’s view that the gradual march toward policy normalization is appropriate, even as economic activity moderates next year.
Energy prices fell 5 percent from the prior month, the biggest decline since September 2015, while food costs jumped 1.3 percent, the most since March. Analyst estimates for the monthly PPI change ranged from a 0.3 percent drop to a 0.1 percent increase.
While the consumer price index — due Wednesday — is considered a more important indicator of inflation, data on producer prices help provide insights into the direction of costs that businesses are facing.
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