Well, the Bureau of Labor Statistics has now released the long-awaited Producer Price Index (PPI) report. This release was postponed due to the recent federal shutdown. This annual report serves as a critical data tool to understand how prices for the goods and services producers depend on, and produce, are changing. More importantly, it can act as a leading indicator for forecasting future consumer price inflation.
In November, the PPI was up 0.2% over the previous month, the biggest monthly increase in wholesale inflation since last spring. The annual rate of the PPI received an upward revision. It’s now at 3%, up from the 2.7% we had previously reported. That means that wholesale inflation was a lot hotter than last month’s reported September numbers would have led you to believe, showing sticky underlying pressure to the economy.
The PPI supplies powerful insights that can help shape consumer expectations. This is the data used to gauge inflation, which tracks price changes at the producer level. Analysts generally consider it to be a leading indicator of future trends in consumer prices. According to this report, the Producer Price Index rose 0.1% between September and October. For the month of October, that annualized rate is 2.8%. This is important data because it gets us deeper into the true picture of inflation metrics after effects from the shutdown-related delays.
The surging months for wholesale inflation, especially recently, can be explained in large part by the energy prices that soared in November. Energy costs continue to dramatically skew overall inflation results. Their rise is part of a larger pattern that’s been seen recently in the Producer Price Index (PPI).
The federal shutdown indeed had some effects, particularly affecting price-update requests and submissions. The report did a good job of impactfully integrating more robust data. These figures were highly anticipated by analysts. They are essential for measuring the health of the economy and forecasting future consumer prices.
The ramifications of these results are far-reaching for industries, regulators, and Americans in general. These surging wholesale prices will sooner or later work through to higher retail prices, which will eat into consumer purchasing power and overall economic growth.