Wholesale prices rose less than expected in October, raising hopes that inflation is on the decline, the Bureau of Labor Statistics reported on Tuesday.
The product price index, a measure of the prices companies charge for finished goods in the market, rose 0.2% against Dow Jones’ forecasts for an increase of 0.4%.
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Stock futures tied to the Dow Jones Industrial Average rose more than 400 points shortly after launch, reflecting market expectation that cost-of-living gains not seen since the early 1980s are easing, if not receding.
On an annual basis, PPI rose 8% compared to September’s increase of 8.4% and reached an all-time high of 11.7% in March. The monthly increase coincided with September’s gain of 0.2%.
The index, which excludes food, energy and trade services, also increased by 0.2% month on month and 5.4% year on year. Excluding only food and energy, the index remained stable on a monthly basis and rose 6.7% year over year.
An important contribution to the slowdown in inflation was the 0.1% drop in the services component of the index. This marked the first drop in said measure since November 2020. Final demand prices for goods rose 0.6%, their biggest increase since June.
The slowdown came despite a 2.7% increase in energy costs and a 0.5% increase in food.
The index is generally considered a good leading indicator for inflation, as it measures the pipeline prices that will eventually enter the market. The PPI differs from the more widely tracked consumer price index in that the former measures the prices that producers receive at the wholesale level, while the CPI reflects what consumers actually pay.
Hopes that inflation is at least slowing were boosted last week when the CPI showed a monthly gain of 0.4%, below the forecast of 0.6%. Annual gain of 7.7% was a slowdown from a 41-year high of 9% in June. After the CPI statement on Thursday, the markets also rose.
Federal Reserve officials are raising interest rates in hopes of reducing inflation. The central bank raised the benchmark borrowing rate six times a year by a total of 3.75 points to the highest level in 14 years.
Vice President Lael Brainard said on Monday that he expects the pace of hikes to slow down soon, as rates are likely to rise further. He said the Fed may take a more “deliberate” stance as it monitors the impact of rate hikes, which included four consecutive 0.75 percentage points increase, on financial conditions.
In other economic news Tuesday, the New York Fed’s Empire State Manufacturing Survey for November posted a reading of 4.5%, up 14 points month-on-month, much better than a -6% reading forecast. The index measures the difference between companies reporting expansion and companies reporting growth. contraction.
However, both paid and received components increased by 1.9 points and 4.3 points, respectively.
