WASHINGTON (AP) — Wholesale prices in the United States rose last month and remained low, but suggest the American economy has not yet fully overcome inflationary pressures.
The Labor Department’s report on Thursday showed its producer price index – which measures inflation before it reaches consumers – rose 0.2% from September to October, compared with a 0.1% augment the previous month. Wholesale prices rose 2.4% year-on-year, accelerating from a 1.9% year-on-year augment in September.
The augment in October was due to a 0.3% rise in services prices. Wholesale goods prices rose slightly by 0.1%, after falling in the previous two months. Excluding food and energy prices, which tend to fluctuate from month to month, so-called core wholesale prices rose 0.3% from September and 3.1% from a year ago. The measured values ​​corresponded to economists’ expectations.
Inflation has fallen more or less steadily since its peak in mid-2022. But average prices are still nearly 20% higher than three years ago – a persistent source of public anger that led to Donald Trump defeating Vice President Kamala Harris in the presidential election last week and returning control of the Senate to Republicans.
The October report on producer prices comes a day after the Labor Department reported that consumer prices rose 2.6% last month from a year earlier. This is a sign that inflation at the consumer level could be moderating after falling to its lowest level since 2021 in September. However, most economists expect inflation to sluggish again at some point.
Inflation is moving toward the Federal Reserve’s 2 percent year-over-year target, and the central bank’s inflation-fighters have been so pleased with the improvement that they have cut their key interest rate twice since September – a policy reversal after they cut rates to eleven times had increased in 2022 and 2023.
Trump’s election victory has raised doubts about the future path of inflation and whether the Fed will cut interest rates further. In September, the Fed all but declared victory over inflation and cut its key interest rate by an unusually immense half percentage point. This was the first rate cut since March 2020, when the pandemic hit the economy. Last week, the central bank announced a second rate cut, a more typical quarter-point cut.
Although Trump has vowed to lower prices, including by encouraging oil and gas drilling, some of his other campaign promises – imposing massive taxes on imports and deporting millions of immigrants working in the United States illegally – are viewed by the majority as economists view it as inflationary. However, according to the CME FedWatch tool, Wall Street traders see an 82% chance of a third rate cut at the Fed’s next meeting in December.
The producer price index released on Thursday can provide an early glimpse of where consumer inflation could be heading. Economists are also watching it because some of its components, particularly health care and financial services, factor into the Fed’s preferred inflation indicator – the personal consumption expenditure index, or PCE index.
Capital Economics’ Stephen Brown wrote in a commentary that higher wholesale airfares, investment fees and healthcare prices in October would push core PCE prices higher than the Fed would like to see. But he said the hike would not be enough “to justify a pause (on rate cuts) by the Fed at its next meeting in December.”
Inflation began rising in 2021 as the economy recovered surprisingly quickly from the pandemic recession, leading to severe shortages of goods and workers. The Fed raised its key interest rate 11 times in 2022 and 2023 to a 23-year high. The resulting significantly higher borrowing costs were expected to plunge the United States into recession. It didn’t happen. The economy continued to grow and employers continued to hire. And for the most part, inflation has continued to sluggish.
