Wholesale Prices Fall More Than Expected

Amid slightly decreasing inflation, wholesale producer prices have fallen in November for the third month straight. This will prove testing as the Federal Reserve is expected to slow down their bond buying programs in the near future. The generally lower prices may force the Fed to reevaluate their time frame for slowing down quantitative easing.

Numbers

Released earlier this morning, the Labor Department announced that the seasonally adjusted producer price index (PPI) was 0.1% lower than last month. The slowdown is mostly due to lower gas prices that have been trading down over the past couple of months. Wholesale prices for gas fell by 0.7% in November, which was the main reason the energy index was also down in that month. Following the same trend, farm, factory and refinery prices were 0.2% lower for the month of October.

November wholesale prices were expected to be unchanged according to economists polled by Reuters.

Prices for wholesale foods stayed even following a 0.8% increase in October. Bakery goods experienced a record fall and the price for younger chickens also decreased, whereas pork prices rose in November. Excluding volatile foods and the costs of energy, wholesale prices were up 0.1%, having increased by 0.2% in October.

Commercial car prices were down by 0.8%, whereas small truck prices increased by 0.6%.

Trailing 12 Months

Producer prices are up by 0.7% over the past 12 months ending in November. The PPI, year over year has risen by 1.3%As seen in the last GDP numbers for the 3rd quarter (3.6% growth), the US economy has been growing more quickly than expected. With payrolls not gaining as quickly, since they usually lag behind growth, the Fed may want to reexamine their options for the start 2014. The market has been showing signs that traders expect a move from the Fed, with the market down over the past couple of days. These lackluster numbers may change the mind of economists at the Fed, at least in the short term.

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