PPI Decline Exceeds Expectations

Driven downward by a 4% fall in energy prices, the U.S. Labor Department's Producer Price Index (PPI) for finished goods fell seven-tenths of a percentage point in November. Economists generally expected a four-tenths decrease.

The November decline followed a seven-tenths percent increase in October and a 1.9% increase in September.

The so-called core PPI, which excludes price changes for food and fuel, increased just a tenth of a percent in November.

"Going forward, consumer price inflation will be tame," predicts Peter Morici, a professor at the University of Maryland's Smith School of Business in College Park. "Gasoline prices fell through October and November [and] have risen only modestly in December. A warm November helped boost natural gas stock building, and this will moderate some of the run-up in heating costs expected this winter."

At earlier stages of processing the pattern was much the same as it was for finished goods. The price index for intermediate goods fell 1.2% in November after a 3% rise in October. And prices for crude goods fell 1.2% in November, following a 6.7% increase in October.

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