There were two important reports on the U.S. economy released this morning. First, data from the Bureau of Labor Statistics (BLS) showed that wholesale inflation pressures in America moderated last month, as the producer price index for final demand (PPI-FD) was unchanged in October. That was below the 0.3 percent increase economists had expected and due largely to a drop in the costs of services that offset increases in goods prices (traced primarily to a 9.7 percent jump in gasoline prices). Moreover, the services PPI-FD fell 0.3 percent in October, which included a sharp 5.7 percent plunge in securities brokerage, investment advice, and related services costs. “Core” PPI-FD, which excludes the more volatile food and energy components, actually fell by 0.2 percent in October but remained up 1.2 percent on a year-over-year basis thanks to the continued uptrend in healthcare services costs. This particular PPI component rose at the fastest annual pace in three years in October and is worth paying attention to because it is used in the measure of overall U.S. inflation preferred by the Federal Reserve, i.e. the Personal Consumption Expenditures (PCE) core price index, which will be released at the end of this month ahead of the next official decision on U.S. monetary policy.
Elsewhere, a report from the Federal Reserve Board of Governors showed that industrial activity in America cooled last month, with total production rising by just 0.04 percent in October. That was below the 0.1 percent rebound anticipated, and September’s gain was revised downward to a 0.2 percent loss. Under the hood, measures of production were largely mixed last month, with a jump in mining being offset by another sharp drop in utilities. More importantly, overall U.S. industrial activity on a year-over-year basis has now declined for the 14th month in a row, a pattern rarely seen outside of a recession. On the bright side, manufacturing, which makes up roughly 75 percent of all industrial production, lifted by 0.2 percent in October. However, capacity utilization, sometimes used as a leading indicator of inflation and potential output, slid to 75.3 percent last month, the weakest reading since May and well below the long-term average.
Sources: Econoday, Twitter, Bloomberg, ZH, U.S. DoL, BLS, FRBG, FRBSLPost author: Charles Couch