By Lucia Muttigani
WASHINGTON (Reuters) – US manufacturing prices rose more than expected in November as supply restrictions persisted, leading to huge annual gains since the series was reviewed 11 years ago and supports the notion that inflation will remain uncomfortably high for some time.
The Labor Department report released on Tuesday showed strong growth in core producer inflation, based on the news that last week’s annual consumer prices rose at the strongest pace since 1982.
Rising inflation is complicating President Joe Biden’s economic agenda, including a $ 1.75 trillion budget to finance social policies and the climate package stuck in the US Congress.
Strong price pressures, coupled with a tight labor market, will prompt the Federal Reserve to announce a massive bond buyout cut by the end of a two-day meeting on Wednesday. The central bank will start raising interest rates sooner than expected.
“Prices are higher than expected in the long run,” said Rubila Farouki, chief economist at High Frequency Economics in the White Plains, New York. “These data support the central bank’s rapid austerity measures, which could lead to a tightening of monetary policy next year.”
The Final Commodity Price Index (PPI) rose 0.8% last month, after rising 0.6% in October. After a 0.2% gain in October, the overall increase in PPI was driven by a 0.7% rise in services. Acceleration of services reflects a 2.9% increase in portfolio management prices.
In the 12-month period up to November, the PPI was up 9.6%. This is the largest increase since October 2010, when it rose 8.8%.
Economists polled by Reuters predict that the PPI will rise by 0.5% on a monthly basis and 9.2% year-on-year.
Excluding volatile components of food, energy and trade services, manufacturers’ prices rose 0.7%. The so-called PPI core gained 0.4% in October.
In the 12 months to November, the PPI core rose 6.9%, the biggest improvement since the 12-month data was first calculated in August 2014. The figure came after a 6.3% rise in October.
The central bank monitors the key individual consumer spending (PCE) price index for its flexible 2% inflation target.
The PCE core price index rose 4.1% in the 12 months from October to October, the highest level since January 1991. November data will be released later this month.
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