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The numbers: Wholesale prices rose rapidly in November and signaled that U.S. inflation is likely to remain high well into 2022.
The producer price index climbed 0.8% last month, the government said Tuesday, easily exceeding Wall Street expectations. Economists polled by The Wall Street Journal had forecast a 0.5% advance.
The increase in wholesale prices in the past 12 months rose to 9.6% from 8.8%, marking the biggest advance since a major change in the index in 2009.
Wholesale inflation is likely rising at the fastest pace in 40 years but the index was recalculated in 2014 using different methodology.
Companies have largely passed on higher costs to business customers and consumers. The consumer price index, for instance, rose sharply again last month to push the increase in the cost of living to the fastest rate in 39 years.
A separate measure of wholesale inflation that strips out the most volatile goods and services rose a bit less in November. The so-called core rate climbed 0.7% for the month.
Over the past year the core rate of inflation has risen 6.9%, up from 6.3% in the prior month.
The core rate strips out food, energy and trade margins and is usually gives a more stable picture of inflationary trends. Yet even the core rate shows worsening inflation.
Big picture: High inflation isn’t going away soon.
A combination of labor shortages and trouble obtaining business supplies has forced companies to raise prices. They can’t get enough of either to produce all the goods and services customers want.
These shortages are expected to ease in 2022, especially if the pandemic finally begins to fade, and result in lower inflation. Yet how much inflation slows — and how quickly — is still far from certain.
Worried about rising prices, the Federal Reserve plans to phase out stimulus for the economy much sooner than it had planned. The central bank is expected to detail its plans on Wednesday.
Key details: The wholesale cost of many goods rose in November, reflecting how much inflation has spread throughout the broader economy. Good prices rose 1.2%.
Some of the most notable increases included gas, fruit, steel and chemicals.
The cost of services such as investment advice, airfare, hotel rentals and transportation also rose sharply.
Inflation pressures in the earlier stages of production were also quite elevated. The cost of raw and partly finished goods both surged again in November.
What they are saying? “This is a testament to the fact that inflation continues to broaden out,” said chief economist Stephen Stanley of Amherst Pierpont Securities. ” The Fed should be very concerned.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open slightly lower in Tuesday trades.
