Inflation for US companies remained low in November

The price of goods and services that producers sell rose by only 0.3%
Packing in lower inflation. 
Packing in lower inflation. 
Photo: Timothy Aeppel (Reuters)
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The prices that US companies pay for goods and services held steady at a low level in November, meaning that consumers will be reaping the benefits if companies pass along those lower prices.

The Producer Price Index rose by 0.3% in the month of November, slightly above economists’ expectations. Economists surveyed by Factset expected a 0.2% increase in the index in November.

Stocks tumbled in response to the news. Still, the increase is the same as October’s and represents an overall slowdown in producer prices, as the year-over-year change in producer prices fell from 8% to 7.4%.

“Easing producer prices foreshadow an improving inflation environment,” said Jeffrey Roach, chief economist for LPL Financial, in an email. “The Fed will likely downshift the pace of rate hikes next week and should continue to downshift in 2023.”

Transportation and warehousing costs fell

Most of the increase in overall wholesale prices was driven by a 0.4% increase in services. Trade moved up by 0.7% in November versus a 0.1% decline in the month before. The cost of transportation and warehousing fell by 0.9% in November, however.

The price of goods climbed by a mere 0.1%, with food increasing by 3.3% but energy more or less balancing that out with a 3.3% decline. The spike in food prices is likely an anomaly and not part of a trend, Roach said. The United Nations food agency’s world price index fell slightly in November.

To be sure, the prices that companies pay for goods and services don’t automatically translate into lower consumer prices, as the prices of labor and capital have to be factored in. But consumer prices got an unexpected jolt from Russia’s war of aggression in Ukraine, and those prices coming back down is a critical aspect of decreasing overall inflation.