US Producer Inflation Remains Tame

U.S. producer prices rose unexpectedly in November for the first time in four months as the cost of services increased, the government reported Friday, but the underlying trend continued to point to weak inflation pressures.

The Labor Department said its producer price index (PPI)—which measures price changes before they reach consumers—rose 0.3 percent last month after falling 0.4 percent in October. However, in the past 12 months, producer prices have fallen 1.1 percent, and November marked the 10th consecutive 12-month decrease in PPI.

Energy prices fell 0.6 percent after being unchanged in October. Declines in energy are likely to continue, as oil prices have fallen sharply this week to below $38 a barrel. Wholesale food prices rose 0.3 percent in November after falling 0.8 percent the previous month. The increase was driven by the biggest jump in butter prices in 15 years.

Excluding volatile energy and food costs, core PPI rose 0.1 percent in November after falling 0.1 percent the previous month. Core PPI was up 0.3 percent in the 12 months ending in November.

Modest economic growth and weak wage increases have kept inflation contained more than six years after the Great Recession ended.

Over the past year, price pressures have been dampened by a strong U.S. dollar and continued declines in oil prices amid a supply glut and slowing global growth, leaving inflation persistently running below the Federal Reserve (Fed) 2 percent target.

But due to a strengthening labor market, economists expect the U.S. central bank to raise its short-term interest rate next Wednesday for the first time in almost a decade.