Services are the disappointment in this report, unchanged in the month following November's 0.5 percent bounce back that followed, however, two prior months of decline. Lack of price traction in services is a blow to Federal Reserve policy makers who are counting on improvement in domestic prices to offset ongoing contraction in fuel and commodity prices. Year-on-year, service prices are up only 0.4 percent.
Energy prices fell 3.4 percent in the month with the year-on-year rate at minus 16.2 percent. Food prices, which have been another source of weakness, fell 1.3 percent with the year-on-year rate at minus 5.2 percent. Two other areas of weakness are export prices, down 0.1 percent and 3.4 percent year-on-year, and also, in bad news for manufacturers, finished goods prices which fell 0.7 percent and are down 2.7 percent on the year. Construction prices, which have been a source of strength, were unchanged though up 1.8 percent on the year.
This report for November did show promise but not in December and it isn't a source of optimism going into the January price collapse for oil which, for WTI, is struggling to stay over $30 this morning. This along with yesterday's import & export price report will not boost confidence that inflation expectations are well anchored and that inflation itself moving higher. Watch next Wednesday for the consumer price report.
Recent History Of This Indicator:
The producer prices - final demand headline is expected to slip 0.1 percent following a much stronger-than-expected 0.3 percent rise in November. Forecasters see less weakness for December's core rate where the consensus is plus 0.1 percent. Service-centered gains in this report would help underscore the strength of domestic demand.
The producer prices - final demand headline is expected to slip 0.1 percent following a much stronger-than-expected 0.3 percent rise in November. Forecasters see less weakness for December's core rate where the consensus is plus 0.1 percent. Service-centered gains in this report would help underscore the strength of domestic demand.
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