There’s no sugar coating this morning’s PPI print for November. From the BLS:

The Producer Price Index for final demand rose 0.4 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices increased 0.3 percent in October and 0.2 percent in September. On an unadjusted basis, the index for final demand advanced 3.0 percent for the 12 months ended in November, the largest rise since moving up 4.7 percent for the 12 months ended February 2023.

In November, nearly 60 percent of the broad-based rise in final demand prices can be attributed to a 0.7-percent increase in the index for final demand goods. Prices for final demand services moved up 0.2 percent.

The index for final demand less foods, energy, and trade services inched up 0.1 percent in November after rising 0.3 percent in October. For the 12 months ended in November, prices for final demand less foods, energy, and trade services advanced 3.5 percent.

The index for final demand goods moved up 0.7 percent in November, the largest increase since rising 1.1 percent in February. Eighty percent of the broad-based advance in November can be traced to prices for final demand foods, which jumped 3.1 percent. The indexes for final demand goods less foods and energy and for final demand energy both increased 0.2 percent.

While yesterday’s increase in CPI could be ignored by a dovish FOMC, today’s PPI print is a little more problematic. The YoY delta has gone from 2.0% in Sep and 2.6% in Oct to 3.0% in Nov. On top of the obviously very ebullient financial conditions, is this the type of environment in which the FOMC should cut rates again?

Futures, already off 10 points overnight, added only a smidge to their losses – thanks largely to the usual compensatory moves by VIX and currencies.

continued for members… Even though VIX slide down to the SMA10 overnight, it very clearly remains above it.  This is not a great sign for the bulls. Despite the pressure being applied to oil and gas prices…

…the 10Y nudged higher for the fourth day in a row.

Will the FOMC cut again in December? I have no idea. I know that they shouldn’t, but whether or not they do will probably say more about their political leanings than anything else. It seems likely that the market would correct if they don’t. So, will they protect Biden’s legacy and keep the plates spinning just a few more weeks, or will they put the incoming Trump administration under the inflationary gun?

Stay tuned…