Producer prices for final demand shot up 3.1% YoY in November, up from 2.8% in October and well above consensus at 2.9%. It’s the highest rate of change since Jan 2012.
The primary culprit: gasoline prices, which BLS officials say increased 15.8%. Imagine what PPI would have registered if they’d used EIA-fabricated data (+17.4%) or the actual increase over Nov 2016 of +20.3% [see: Again, With the CPI Games?]
While the data certainly offer convenient cover for a rate hike, they present practical problems for central bankers who are worried about disappointing the algorithms which drive equity markets.
Rising oil and gas prices have been instrumental to rising equity prices. But, as we’re reminded once again, there is no free lunch.
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