U.S. headline producer prices rise strongly in October

Producer prices in the U.S. grew strongly in October. PPI rose 0.4 percent sequentially, coming in above the consensus expectations of 0.1 percent. Stripping energy, food and trade, the PPI inflation rose more modestly at 0.2 percent as part of the strength in the headline figure was driven by trade margins and food prices. Prices of goods and services rose 0.3 percent and 0.5 percent, respectively. In the goods category, food prices rose 0.5 percent, while energy prices came in flat after a rise of 3.4 percent in the prior month. In September, energy prices had surged, thanks to the impact of Hurricanes Harvey and Irma, but that effect appears to have waned in October.

Meanwhile, services PPI was up 0.5 percent sequentially, owing to trade services that rose 1.1 percent and transport and warehousing that rose 0.8 percent. However, excluding trade, transportation and warehousing, services rose just 0.1 percent sequentially. On a year-on-year basis, producer prices grew 2.8 percent, while PPI excluding food, energy and trade rose 2.3 percent.

Personal consumption PPI rose 0.4 sequentially and 2.4 percent year-on-year. The core measure, which excludes food, energy and trade, rose 0.2 percent, a modest acceleration from the trend throughout the summer months.

Today’s report shows continued rebound in producer price pressures in October, although the solid rise in the headline measures probably exaggerates the degree of that strength, noted Barclays in a research report. Solid trade margins and warehouse cost rises stimulated the headline measure and masked more modest, but stable improvements elsewhere. Pipeline price pressures are expected to improve gradually.

“For the October CPI report, due for release tomorrow, we forecast headline CPI to have increased 0.1 percent m/m (2.0 percent y/y) and core CPI to have increased 0.2 percent m/m (1.7 percent y/y)”, added Barclays.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -23.7719. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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