Producer Prices Rise Much More Than Expected

Jan. 13, 2005
By John S. McClenahen The U.S. Labor Department's producer price index (PPI) for finished goods rose 1.7% in October, nearly three times the rate that economists generally expected and dramatically higher than September's 0.1% increase. The so-called ...
ByJohn S. McClenahen The U.S. Labor Department's producer price index (PPI) for finished goods rose 1.7% in October, nearly three times the rate that economists generally expected and dramatically higher than September's 0.1% increase. The so-called core PPI, which excludes food and fuel, rose 0.3% in October, seemingly low in comparison to the overall PPI but still three times the 0.1% generally expected. Energy and food were among the prime drivers of higher prices at the producer level of the U.S. economy. Energy prices were up 6.8% in October; food prices were up 1.6%. However, notes UBS Securities LLC, "the recent drop in oil prices should lead to some reversal in coming months." As for the core PPI, the second consecutive 0.4% monthly rise prices for capital goods was a factor. "A rush to buy capital equipment before the 50% bonus depreciation tax break lapses at yearend could be exacerbating price pressures slightly," says UBS.

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