Economy

U.S. producer prices increase modestly in November

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Key Points
  • U.S. producer prices barely rose in November, supporting views that inflation would remain benign in the near term.
  • A flare-up in new Covid-19 infections has restrained the labor market and demand for services, keeping a check on prices.
  • The producer price index for final demand edged up 0.1% last month after increasing 0.3% in October, the Labor Department said.
Employees sort Bordeaux cookies for packing at the Pepperidge Farm Inc. manufacturing facility in Richmond, Utah.
George Frey | Bloomberg | Getty Images

U.S. producer prices barely rose in November, supporting views that inflation would remain benign in the near term as a flare-up in new Covid-19 infections restrains the labor market and demand for services.

The producer price index for final demand edged up 0.1% last month after increasing 0.3% in October, the Labor Department said on Friday. That was the smallest gain since April. In the 12 months through November, the PPI advanced 0.8% after increasing 0.5% in October.

Economists polled by Reuters had forecast the PPI gaining 0.2% in November and rising 0.8% on a year-on-year basis.

A 0.4% increase in the price of goods accounted for the rise in the PPI. Goods increased 0.5% in October. Services were unchanged after rising 0.2% in October.

Excluding the volatile food, energy and trade services components, producer prices inched up 0.1%. The so-called core PPI climbed 0.2% in October. In the 12 months through November, the core PPI gained 0.9% after rising 0.8% in October.

Inflation is running below the Federal Reserve's 2% target, a flexible average. The government reported on Thursday that consumer prices increased 0.2% in November.

While the coronavirus pandemic has raised prices of some goods because of supply constraints, it has hurt demand for services like travel and dining out, keeping inflation in check. Millions of Americans are either underemployed or out of work, limiting wage inflation.

The United States is in the midst of a fresh wave of coronavirus infections, pushing the number of confirmed cases to more than 15 million and deaths to over 289,740 since the pandemic started. New strict stay-at-home orders went into effect in California this week. Other states and local governments have also imposed restrictions on businesses.

Applications for unemployment benefits jumped to their highest level in nearly three months last week.

Despite the soft inflation backdrop, economists do not anticipate a deflation, a decline in the general price level that is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.

Wholesale food prices rose 0.5% in November after accelerating 2.4% in October. The cost of residential electricity, natural gas and tobacco products increased. But gasoline prices tumbled 1.9%. There were also decreases in the cost of pharmaceutical preparations.

Core goods prices rose 0.2% after being unchanged in October. Margins for final demand trade services, which measure changes in margins received by wholesalers and retailers, fell 0.3%, helping to restrain services.

Healthcare costs rose 0.2% after climbing 0.3% in October. Portfolio fees were unchanged. That followed October's 0.5% increase. Airline tickets decreased 7.1% after increasing 1.2% in October.

Those airline tickets, health care and portfolio management costs feed into the core personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure.