The inflation picture keeps improving.
New data from the Bureau of Labor Statistics out Wednesday showed Producer Prices increased less than economists had projected in the month of November.
The “core” Producer Price Index (PPI) showed prices excluding the volatile food and energy categories were flat in November compared to the month prior, lower than 0.2% increase economists had expected. On a yearly basis, core prices rose 2%, below estimates for a 2.2% increase.
This, according to economists, will be a welcome sign for the Federal Reserve as lower PPI should mean the Fed’s preferred inflation gauge, core Personal Consumption Expenditures (PCE), will come in lower than initially expected for the month of November.
“Based on inputs from yesterday’s Consumer Price Index and today’s Producer Price Index, we estimate that core PCE will barely rise 0.1% over the month,” Renaissance Macro Research head of economics Neil Dutta wrote on Wednesday. “If that is right, over the last six months, core PCE would have gone up just 2.1% at an annual rate. In other words, we are right there [near the Fed’s 2% inflation target].
“The Fed will need to revise down its inflation estimates for 2023, but the momentum going into next year implies a bit of downside there too.”
To Dutta, the promising inflation news could mean more Fed interest rate cuts than initially expected in 2024, too.
