U.S. inflation pressures firmed last month, according to new data from the Bureau of Labor Statistics (BLS). First, the core producer price index (PPI), which excludes the volatile food and energy components, rose by 0.3 percent in November and 2.7 percent over the past twelve months. Both of those gains were larger than expected, and the annual pace of growth was one of the highest readings in the past seven years. Similarly, the core consumer price index (CPI) increased by 0.2 percent in November and 2.2 percent during the past twelve months. The annual rise nearly matched the 2018 high and was helped by a recent pick up in goods inflation related to both materials shortages and tariffs.
Increases in the costs of shelter (rent), medical care, and used cars also contributed to November’s uptick in core CPI. Altogether, the latest firming in both wholesale and household inflation was far from significant but likely still strong enough to help officials at the Federal Reserve justify another quarter-point increase to the federal funds rate at next week’s Federal Open Market Committee (FOMC) meeting. More importantly, a separate report from the BLS also released this morning encouragingly showed that real (inflation-adjusted) average hourly earnings growth on an annual basis jumped to 0.8 percent in November, one of the best readings of the current business cycle. The continued acceleration in Americans’ wage gains will be needed to sustain consumer spending growth, especially as more businesses raise selling prices to offset the rise in input costs.
Sources: Econoday, U.S. DoL, ZH, Bloomberg, FRBSL
Post author: Charles Couch