U.S. November Producer Prices Rise 3.2%; Core Up 0.4% (Update2)
By Bob Willis
Dec. 13 (Bloomberg) -- Prices paid to U.S. producers climbed at the fastest pace in 34 years in November, pushed up by surging costs for fuel. Excluding food and energy, prices rose the most since February.
The 3.2 percent gain, twice as much as economists had forecast, follows a 0.1 percent increase in October, the Labor Department said today in Washington. Core prices, which exclude food and energy, jumped 0.4 percent after no change the prior month.
The rising prices highlight the Federal Reserve's concern that energy and commodity costs may feed inflation at the consumer level. The Fed this week cut its benchmark rate for a third time in four months and said it would ``continue to monitor inflation developments.''
``Inflation isn't in complete remission yet,'' Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. ``It looks as if the Fed was right to keep its eye on inflation and say the risks of inflation are still out there.''
Economists had forecast a 1.5 percent increase in producer prices, according to the median of 77 estimates in a Bloomberg survey. Forecasts ranged from 0.3 percent to 2.5 percent. Excluding food and energy, the median forecast was for an increase of 0.2 percent following no change the prior month.
A separate Commerce Department report today showed retail sales in the U.S. increased twice as much as forecast in November, easing concern that near-record fuel prices and falling home values would trip up consumers.
Consumer Strength
The 1.2 percent gain, the biggest since May, followed a 0.2 percent rise the prior month, the Commerce Department said. in Washington. Purchases excluding automobiles jumped 1.8 percent, the most since January 2006.
November's gain in producer prices was the biggest since August 1973, according to Labor Department figures.
Over the past 12 months, producer prices rose 7.2 percent, compared with a 6.1 percent rise in the 12 months through October. Producer prices excluding food and energy rose 2 percent for the 12-month period.
Energy costs rose 14.1 percent, a record one-month gain, after falling 0.8 percent in October. Costs for gasoline rose a record 34.8 percent. Most of the recent jump in energy prices took place in the first half of November, when the survey was conducted, economists said. The government, in calculating wholesale prices, asks survey participants to report costs as of the Tuesday of the week that includes the 13th.
Energy Costs
Crude oil futures on the New York Mercantile Exchange averaged $94.89 a barrel in the first 13 days of November, up from $81.02 in the same period in October. They reached a record $99.29 a barrel on Nov. 21.
Today's producer price report showed food prices were unchanged in November. The cost of consumer goods rose 4.0 percent.
Kroger Co., the biggest U.S. grocery chain, said Dec. 11 its third-quarter sales at stores open at least five quarters increased 5.7 percent, excluding fuel, as it charged shoppers more after foodmakers Kraft Foods Inc. and General Mills Inc. boosted their prices due to higher milk and wheat costs.
Costs of intermediate goods, those used in earlier stages of production, rose 3.7 percent last month, after rising 0.1 percent in October. They were up 8.1 percent from a year ago.
Excluding food and energy, intermediate prices rose 1.0 percent after rising 0.1 percent. Compared with a year ago, core intermediate goods costs were 3.3 percent higher.
Prices for raw materials, or so-called crude goods, rose 8.7 percent after rising 2.4 percent.
Computers, Cars
The report showed prices for capital equipment rose 0.3 percent. Computer prices fell 2.4 percent, following a 1.3 percent decline.
Passenger car prices rose 0.6 percent after a 1.0 percent gain and costs of light trucks rose 2.3 percent after dropping 2.7 percent the prior month, pulling the whole index lower.
The swings in auto prices may be related to difficulties in adjusting for seasonal variations as automakers roll out new models, economists said.
Automakers are among companies finding it difficult to raise prices as sales weaken with the housing recession. Even after offering the usual range of incentives, General Motors Corp.'s U.S. sales plunged 11 percent in November.
``You still see a relatively high level of incentive activity,'' Mark LaNeve, GM's North America sales vice president, said in a conference call on Dec. 3. ``I don't see any huge opportunities'' for raising prices in the next year.
Imports
Producer prices are one of three inflation measures reported by the government. Prices of goods imported into the U.S. rose 2.7 percent in November, the most in 17 years, on higher costs for oil, the Labor Department reported yesterday.
Tomorrow, the Labor Department is forecast to report that prices paid by consumers rose 0.6 percent in November following a 0.3 percent increase the prior month, according to a Bloomberg survey median. Core inflation rose 0.2 percent for a second consecutive month, the report is also projected to show.
The Fed's preferred inflation measure, which is issued by the Commerce Department later this month, rose 1.9 percent in October from a year earlier. That's the second-smallest year- over-year gain in nearly four years and is within the 1 percent to 2 percent zone some Fed officials have said is preferable.
`Moderate Growth'
The Fed on Dec. 11 lowered its benchmark rate a quarter point to 4.25 percent, its third cut in four months, saying the action ``should help promote moderate growth over time,'' even as it added that ``some inflation risks remain.''
Fed policy makers, in their first quarterly economic outlook released Nov. 20, said they now expect U.S. gross domestic product to increase 1.8 percent to 2.5 percent in 2008, ``notably below'' the 2.5 percent to 2.75 percent they predicted in July. Inflation, excluding food and energy, will run at a 1.7 percent to 1.9 percent rate next year, slightly lower than prior estimates.
The Fed this week said it would ``continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability.''
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Last Updated: December 13, 2007 08:50 EST |
