En­ergy and ser­vices fuel jump in US pro­ducer prices

Gulf Times Business - - BUSINESS -

US pro­ducer prices rose more than ex­pected in Oc­to­ber and at their fastest pace in six years but mea­sures of un­der­ly­ing price pressure cooled, bol­ster­ing the view that the US cen­tral bank is not fac­ing a resur­gence in in­fla­tion.

Other data yes­ter­day sug­gested US con­sumers polled this month ex­pected less in­fla­tion over the next year com­pared to their ex­pec­ta­tions a month ear­lier.

Prices paid by pro­duc­ers rose 0.6% in Oc­to­ber, the big­gest gain since Septem­ber 2012, with much of the in­crease fu­elled by a jump in costs for en­ergy and trade ser­vices, ac­cord­ing to fig­ures pub­lished by the US Labour Depart­ment.

An­a­lysts polled by Reuters had ex­pected pro­ducer prices to rise 0.2% from Septem­ber.

But for a core mea­sure of pro­ducer price pres­sures, cost gains slowed, the data showed.

Pro­ducer prices out­side food, en­ergy and trade ser­vices rose 0.2% in Oc­to­ber, down from a 0.4% gain in Septem­ber.

Com­pared to a year ear­lier, th­ese core prices were up 2.8%, com­pared to 2.9% in the 12 months through Septem­ber.

US stocks opened lower as a batch of weak Chi­nese data raised con­cerns about global growth.

Yields on US govern­ment debt, how­ever, fell.

The Fed­eral Re­serve left in­ter­est rates un­changed on Thurs­day and said it re­mained on track to con­tinue rais­ing bor­row­ing costs grad­u­ally.

It is widely ex­pected to raise rates in December.

The US cen­tral bank has been slowly hik­ing in­ter­est rates since 2015 to keep in­fla­tion un­der con­trol. The Fed seeks to keep prices for con­sumers ris­ing 2 % an­nu­ally and mon­i­tors pro­ducer prices for signs that in­fla­tion­ary prices might be build­ing.

In Oc­to­ber, those in­fla­tion­ary pres­sures ap­peared strong­est in rel­a­tively volatile goods and ser­vices.

Pro­ducer prices for trade ser­vices, which in­clude costs for re­tail­ing and whole­sal­ing mer­chan­dise, rose 1.6%, the big­gest gain since Oc­to­ber 2014.

Costs surged 2.7% for en­ergy, the fastest in­crease in five months.

US con­sumers sur­veyed in November ex­pect prices to rise 2.8% over the next year, ac­cord­ing to the Univer­sity of Michi­gan’s sur­vey of con­sumer sen­ti­ment. That’s down from an ex­pec­ta­tion of 2.9% in the univer­sity’s Oc­to­ber sur­vey.

Over the next five years, how­ever, in­fla­tion ex­pec­ta­tions rose slightly.

US con­sumer sen­ti­ment has been on an up­ward trend since 2015, al­though the Univer­sity of Michi­gan’s November sur­vey showed a slight cool­ing from Oc­to­ber.

A sep­a­rate re­port from the Com­merce Depart­ment showed whole­sale in­ven­to­ries rose 0.4% in Septem­ber, slightly faster than its ini­tial es­ti­mate of a 0.3% in­crease.

With US job and wage growth bol­ster­ing do­mes­tic de­mand, busi­nesses are ex­pected to boost stocks of goods, which could un­der­pin pro­duc­tion at fac­to­ries.

In­ven­to­ries other than au­tos, a mea­sure that goes into the cal­cu­la­tion of gross do­mes­tic prod­uct growth, rose 0.2% in Septem­ber.

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