The problem is in services, which account for 67% of PPI. But goods prices are re-accelerating too. The whole inflation scenario has changed.
By Wolf Richter for WOLF STREET.
The prior months’ data of the Producer Price Index were revised substantially higher today, powered by whoppers of upward revisions in the PPI for services, something that has been happening month after month, and on top of that came the price increases in November.
The PPI tracks inflation in goods and services that companies buy and whose cost increases they ultimately try to pass on to their customers. And the entire year 2024 through November has been a big acceleration.
The revisions, and the additional price increases in November, caused the overall PPI for final demand to rise by 3.0% year-over-year, unrounded (+2.98%) the fastest increase since February 2023, and a substantial acceleration from October, which a month ago was reported as an increase of 2.4% year-over-year, and up from the original September increase of 1.8%. So the data went in two months from 1.8% to 3.0%: that’s a big fast acceleration.
The freak drop in July in the chart above was caused in the services index, that forms the majority of the overall PPI. More in a moment.
On a month-to-month basis – likely to be revised even higher next month – the PPI for final demand rose by 0.38% on top of the upwardly revised price levels in the prior month, according to data from the Bureau of Labor Statistics today
The plunge in energy prices from mid-2022 until recently had pushed the overall PPI down into its pre-pandemic range, and papered over the inflationary forces in services. But that is now over. On a month-to-month basis, energy prices rose in November, and food prices jumped, and other goods prices rose, and services prices rose.
“Core” PPI, which excludes food and energy, accelerated to 3.4% year-over-year, the fastest pace since February 2023, up from the originally reported 3.1% in October and up from the originally reported 2.8% in September. On a month-to-month basis, Core PPI added 0.22% in November to the upwardly revised October price level.
The Services PPI for final demand accounts for 67% of the overall PPI. It’s the biggie, and it’s where inflation is. And it’s where the whopper upward revisions are.
The PPI services accelerated to 3.9% year-over-year in November, the fastest pace since February 2023,, and there were whoppers of upward revisions for October to 3.8%, from the 3.5% reported a month ago, and for September to 3.6%, from the 3.1% reported two months ago. So from 3.1% to 3.9% in the data in two months. That’s quite a trip. We’re now eagerly awaiting the upward revisions for November.
The freak drop in July occurred because the month-to-month reading of July 2023 of +9.9% annualized fell out of the 12-month period, and was replaced by the -2.8% reading of July 2024.
The Services PPI month-to-month increased by 2.9% annualized (+0.24% not annualized) in November, on top of the upwardly revised October level.
And those were the whopper revisions, month-to-month annualized:
- October revised to +3.9% today, from the +3.2% reported a month ago
- September revised to +4.9% today, from the 2.0% reported originally two months ago
- August revised to +5.8% today in serial revisions from the originally reported 2.6% three months ago.
Double-decker luxo-whopper upward-revisions going back months! In other words, PPI inflation in services is not only getting worse, but has been much worse than previously reported.
“Finished core goods” PPI has been relatively tame and with only small revisions, compared to the inflationary mess going on in services. Some prices have been falling, others rising.
Year-over-year, the index rose by 2.5% in November, an acceleration from 2.4% in October, and the fastest increase since December 2023, and up from the low of 2.2% in May. The index has been all year in the upper portion of the pre-pandemic range.
On a month-to-month basis, the index rose by 3.1% annualized in November, and this year has been in the range from +1.5% to +3.7%.
But in terms of overall inflation, the problem is that the finished core goods PPI stopped decelerating this year, and instead started to softly accelerate again. It was a big contributor to the deceleration of the PPI last year, and that is now over.
The PPI for “finished core goods” includes finished goods that companies buy but excludes food and energy products.
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Wow, just wow! What’s your next move, JPow?
Jpow?
You mean Arthur Burns I think.
And Arthur Burns doesn’t grocery shop, so he can’t feel our pain.
Please refere to shadow stats & times it by 3 to get a better read on melancholy reality.
Try to avoid the FRED. I would commence with massive character assassination of the FRED, but I know my childish antics don’t go over well here in the peanut gallery.
FRED does NOT produce ANY data of its own. FRED just collects the data from public and private sector entities that produce the data and then it turns the data it collected into charts. It has data from the BLS, the BEA, the Census Bureau, the Fed, the IMF, the ECB, the BOJ, the World Bank, the NAR, it has thousands of data sets it gets from entities all over the world. Underneath each chart is the source of the data. It was a really cool thing when FRED first came out maybe 15 years ago because much of this data was hard to get, but now it’s easy to get, and FRED is often the clunkiest way of getting it.
Well what did they do back in 2017?
cuz it looks like 2017 again.
Looks kinda normal, unless you personally just went thru a horrible inflation event.
Yes, the inflation prints are within the range (somewhat above) 2010’s inflation, but the difference is the ~1% federal reserve rate then vs ~4.5% now. Something is different.
I would think that this increasing PPI is the ‘stopper’ to lowering interest rates anymore.
I doubt it. Powell likely has committed to this reduction.
Very unlikely that cut doesn’t happen. They want inflation in this range irrespective of what they say out loud. They will freak if inflation goes higher that 4%. Between 3-4 is totally okay
I would have thought so, too, but Aman I think you’re spot on, unfortunately. Though I’m not even sure if they’d be upset with inflation above 5% or 6%; look at how slow they were when it got up to 9%. How long were they going on about their transitory narrative?
Now whenever I see data like this I just think inflation’s up? OK, time for more rate cuts I guess.
At this point employment is what the fed is watching which is at all time highs, lol! Inflation nipped the bud in their eyes. Money has wised up flowing into stocks, non Inflation causing commodities and crypto. Residential real estate prices have flatlined and assuming the same for raw land. One big conspiracy in my mind where big money was told they better invest in something that doesn’t cause main street Inflation.
there’s no such thing. asset inflation always eventually leads to main street inflation. it just depends on the time delay.
@Franz –
No, asset inflation usually leads to bubbles popping and major recessions.
Dot-com bubble.
Housing bubble.
Everything bubble.
Asset inflation doesn’t carry over to consumer price inflation because the people who own the vast majority of the assets don’t have a tendency to spend their capital gains on consumer items.
Crypto bros already picking out what color they want their lambo from their fartcoin profits.
bagehot’s ghost, only if the bubbles are allowed to pop. if our leaders come in and drop rates to 0 and print money to prevent it from popping, then it doesn’t pop, and no recession.
it does carry over, as the “wealth effect” spending drives prices up. we’ve seen that over the past couple of years.
@Franz, this concept, that “bubbles are allowed to pop”, is not how it has ever worked in history.
A bubble is a psychological behavior, a mass insanity, madness of crowds. The many good books on this very human behavior include “Manias, Panics and Crashes”, and “Devil Take the Hindmost”.
They tell the stories of many bubbles. Bubbles can sometimes be popped, but most often they pop on their own, when the mass insanity exhausts itself. But a bubble has never been prevented from popping, there is no “allowing a bubble to pop” (nor not-allowing it to pop), that’s just not how it ever works. A social mania is far larger and more powerful than any policymaker or institution.
What happens when bubbles end is simply that everyone who is going to buy in, has done so. There are no more buyers. but then some people exhaust their capacity for self-delusion and get out, prices stop rising, and start falling, and then others follow them. Once overvalued markets start falling, there’s an insane amount of downward momentum.
In nearly every single market crash since 1913, for instance, the Federal Reserve was frantically lowering interest rates. They were “trying not to allow the bubble to pop”, and yet that never worked. When a bubble pops the valuations are so obviously obscene that interest rate changes alone are immaterial.
For instance, today we have a handful of mega-cap stocks with modest growth prospects nevertheless trading at 30-50x earnings (or more). That isn’t going to last, and when people realize how dumb it is for them to be that expensive, it won’t matter what the interest rate is, the shares are so far overvalued that they have to come down.
The same thing prevails in many housing markets.
It’s a dicey game though isn’t it, because if they cut with inflation rising, bond yields could start to rise irrespective…. please someone correct me if I’m wrong
Even 4% could be transitory. I’m sure he’s willing to make that bet.
and if that’s true, which seams likely, then don’t we get a bond repricing event? Say 150 basis points higher??
You’d think so, sure. But I have faith in the FOMC to take a hard, clear-eyed look at the data in front of them–reaccelerating consumer goods inflation, stubbornly high consumer services inflation, massive upward PPI revisions, a much tighter labor market than apparent a few months ago, a screaming AI and crypto bubble–and, after soberly analyzing it, do the wrong thing
You almost got me.
But hey, the new crypto coins are pretty cool these days. Have you checked them out as an investment tool? Some of them will be completely ai-and-whatever coated, amazing!
Remember, when it comes to crypto, there is ALWAYS a bigger fool.
Until there isn’t.
After all, blockchain is so mysterious (AI driven perhaps?) that it has to be great./s
– Jerome Powell is going to cut rates by 25 basispoints on december 18. And the outlook is for more cuts in the (near) future).
If your expecting the adults in the room to stop rate cuts with inflation over 2%, you are going to get your heart broken in two.
Besides…. you might find positive things about hyperinflation.
I hear starting revolutions in economic depressions are all the rage…. or writing russian poetry
J.M., I agree with you for the next cut, but after that, why cut?
Especially after the soon to be higher tariffs.
The financial markets are pricing in no problem with Inflation whether one looks at stock or bond valuations. Or the direct measure via the 5year, 5 year forward inflation expectation market itself.
It is also assuming the Fed is sanguine about the Inflation outlook as well.
Irrationality in financial markets?
I would say so.
the stock and bond valuations don’t jibe with each other, so one is irrational. stocks are priced for zirp and qe. bonds are priced for inflation getting under control, but rates staying at 3-4%.
someone is wrong.
“The financial markets are pricing in no problem…”
I’m not sure the Financial markets are even in the business of “pricing in” anything.
In 1982 inflation hangover was still a big problem…One prominent economist proffered the following observation(based on real events). Powell is likely ignorant of this view but the electorate is not.
“Electric Avenue”
Boy! Boy!
Now in the street, there is violence
And-and a lots of work to be done
No place to hang out our washing
And-and I can’t blame all on the sun
Oh no, we gonna rock down to Electric Avenue
And then we’ll take it higher
Oh, we gonna rock down to Electric Avenue
And then we’ll take it higher
Workin’ so hard like a soldier
Can’t afford a thing on TV
Deep in my heart, I abhor ya
Can’t get food for the kid
Good God, we gonna rock down to Electric Avenue
And then we’ll take it higher
Ho, we gonna rock down to Electric Avenue
And then we’ll take it higher
Oh no
Oh no
Oh no
Oh no
Oh God, we gonna rock down to Electric Avenue
And then we’ll take it higher
Ho, we gonna rock down to Electric Avenue
And then we’ll take it higher
Who is to blame in one country?
Never can get to the one
Dealin’ in multiplication
And they still can’t feed everyone
Oh no, we gonna rock down to Electric Avenue
And then we’ll take it higher
Ho no, we gonna rock down to Electric Avenue
And then we’ll take it higher
Ho, out in the street
Out in the street
Out in the daytime
Out in the night
Oh, we gonna rock down to Electric Avenue
And then we’ll take it higher
Ho, we gonna rock down to Electric Avenue
And then we’ll take it higher
Out in the street
Out in the street
Out in the playground
In the dark side of town
Ho, we gonna rock down to Electric Avenue
And then we’ll take it higher
Hey, we gonna rock down to Electric Avenue
And then we’ll take it higher
Ohh yeah
Rock it in the daytime
Rock it in the night
Rock it in my…
Eddy Grant
Meet the new boss.
Same as the old boss.
Well heck, I got an email from Youtube TV this morning, there service is going from $73 to $83, what is that like 14%?
Cancel and avoid the distractions.
Two months ago Republic Services increased my monthly dumpster fee from $275 to $365 – all on that fuel/envir surcharge line.
” PPI inflation in services is not only getting worse, but has been much worse than previously reported.” It all seems a bit too convenient, to accommodate a rate cutting cycle in 2024.
I am loving this! There is no doubt that inflation is going to double digits this year. Can you sing, Don’t Cry for Me, Argentina? It’s not every day you have a ringside seat to such economic destruction! I was young during the early 80’s when I had a 14% mortgage and I was lucky to have it at all. And they think it can’t happen again? FOOLS!
I’m not a landlord now and I can tell you I would not advise being one if rates hit 14%. Can you imagine trying to collect rent in that environment? It’s already bad enough. Here in Hawaii it can cost $50k and year or more to evict a “reluctant to vacate” tenant. One problem: there is nothing else to rent so where do they go?
50k to hire 2 mokes to pull the tenant out like one opihi and dump him in a cane field? I got one cuz take care fo 5 large
I’ll bring the popcorn.
I’m going short term on CD’S, and waiting for the 2 year T- note to hit 6%.
6% on the 2 year seems a bit high even for a bond bear like myself (although I certainly wouldn’t be complaining…)
“double digit this year”? It better hurry up, only one month left. “Next year” maybe has a shot.
Mentally, I have already moved on to 2025. It should be quite a circus!
Escierto
We’re already IN double digit inflation if you take the necessities that us poor middle class slobs have to buy every month. I see the figures being revised upward soon after the inauguration as the new economic team takes over. The Fed should NOT be cutting rates, but rather raising them. J Powell should be told to pack his bags get lost.
Rising PPI and revision realities unfolding — the ongoing upward slope of inflation will likely accelerate with the deficit interest payments and inflationary policies ahead,
Cutting rates seems inflationary — but a recession may help reset and balance the excess — unfortunately we probably go from a massive unmanageable deficit to an economic black hole.
There is the (proposed) possibility of swapping treasury and Fed gold reserves for crypto tokens, but that kinda dilutes the value of the real reserves and makes this entire casino into a super nova, that ends the existence of the casino. Who cares?
“I believe the best thing the Fed can do now is to aggressively reduce its balance sheet and, hence, reduce the amount of credit it is currently supplying to the market.”
An old hack that used to work at Fed —
Dr. Daniel Thornton. During his 33-year career at the St. Louis Fed, Thornton served as vice president and economic advisor
What business would stop pouring on price increases when possible at this point? Most people have been constantly conditioned for inflation in the last 5 years with very little resistance from consumers.
There will never be true market price discovery with constant Fed manipulation and a runaway train spending congress. And the Fed cannot afford deflation or the game is over sooner. Expect current inflation rates more or less the norm.
Muh transitory. Muh jumbo rate cut. Jay Powell and his pigmen are harvesting every last morsel of wealth that they possibly can from the working class and the poor. MUST FEED PIG FACE.
One billion is too many and 400 billion ain’t enough. $20 per dozen eggs for thee, multiple yachts for me. When asked about the plight of the poor, the answer is likely “ewww, they are breathing too much free air.”
The system is rotten to the very core. It doesn’t work anymore.
Agree completely. I have lost faith in the system. The only hope of the common people around the world is a black swan event crashes the stock market and the Fed uses their standing repo facility instead of QE. There has to be consequences for this kind of unprecedented greed and corruption.
To all comes a warner, and later, a day of reckoning, and payment for what the soul earned, without the least injustice.
Those yachts are going to get a lot more expensive as well, not sure that’s a win. The Investor class just doesn’t really “win” with inflation, they just don’t lose like everyone else.
I think FED & Treasury lost the battle against inflation in SVB bailout. The two panicked unnecessarily and bulls are in charge since then. I don’t believe inflation will ever fall to 2 percent or lower in next 10 years. Everybody will have to learn with the current inflation and rates in this eternal bull market. Bulls always have a story. They had the AI and now they have quantum computing. But the real story is incompetent long-term monetary policies.
A bill introduced in the Texas House for a “strategic bitcoin reserve”. It seems we’re trying to add a new chapter to that book about delusions and the madness of crowds.
Accelerate QT!!
Reducing the Treasuries runoff was a critical mistake. Reestablish the $60B cap per month.
Reestablish the $60B per month Treasuries runoff from the Balance Sheet.
Accelerate QT.
$PLTR will be 100+ by February 2025 hold onto your Karps! 🐟
Did you sell your NVDA and buy PLTR with the proceeds because you suddenly switched from hyping NVDA to hyping PLTR?
No dividend, no thanks.
Won’t PPI go up bigly next year when the Trump tariff takes effect? It always puzzles me how Americans justify their choice of presidents. Voting against self interests is something else.
see, this is exactly the mentality that is the reason that he won, along with other right wing populists in europe getting increasing support.
everyone votes for their self interest. they just define it differently than you do.
for some people, it’s taxes. for others, it’s gun rights. for others, it’s religious and moral issues. for others, it’s marijuana.
people who voted for him did so because they either don’t think the tariffs will take effect, they think that they will take effect but will positively benefit their lives, or think they will take effect and won’t necessarily positively benefit their lives, but that other things he’ll do will benefit them and outweigh i.
use your head here.
I read on one blog a woman complaining that her grocery bill was still the same or higher even though she had voted for Our Great Leader. The one question on her mind was when could she look forward to seeing her bills drop. That, my friends, is the typical American, who can barely read at a sixth grade level.
Lol @ Escierto
So if I got this right:
A) He isn’t actually going to do anything he says he’s going to do that his voters don’t like.
B) He IS going to do things he didn’t say he was going to do that they do like.
If we’re simply going to project all of our own wishes onto a candidate and then vote for them because of it, what makes the Republican candidate the only valid subject of that? Just the fact that he isn’t recognizing reality any more than his voters are? I believe that’s his advantage over other Republicans: nobody knows what he’s actually going to do. He’s a blank screen that’s easy to project onto. Inflationary policies minus the inflation? Anything is possible!
Most of his supporters can’t balance a bank book and complaining about the price of their mountain dew at family dollar. These are not sophisticated minds that have the vaguest understanding or macroeconomics and how tarrifs might play in. They are emotional animals.
This is precisely the elitist bullshit that got Democrats in trouble with the American people. I’m just shaking my head in disbelief.
Likely they will view it as a one time effect. In the UK sales tax (VAT) went up 2.5%, inflation went up that year but it was mostly ignored. The issue is if wages follow the increase, there the issue starts.
Who says there will be any tariffs ? The biggest positive about Trump is probably that he is transactional. It about the deal, not about policy…anyway, first he has to get his “government” in place….
I wouldn’t be surprised if Russia ends up as one of our larger trading partners by the end of 2025…anything is possible and thats a good thing.
You wouldn’t be surprised if a ruined and reeling economy like Putin’s becomes a large US trade partner?
First off, they’re far too small to fill that role.
Sure, it has oil and gas and natural resources, but apart from a now antiquated space and generally inferior technology, there’s not a lot the US wants or needs from Russia that we can’t buy elsewhere or make better versions of ourselves.
Besides which, Americans don’t want Russia to get our money. They’re an enemy of the west and freedom.
WR has said many times how tarriffs would impact the prices and how it’d be beneficial for USA in the long run.
CNN and other media outlets are running stories talking about the disadvantages of Trump’s policies as they are biased to the left.
I don’t like either party but voted for the incoming one as the existing one didn’t even acknowledge any of the problems which got Trump elected. I usually like to rock the boat.
Re: “ the existing one didn’t even acknowledge any of the problems”
Everyone had a different perspective about what they thought they heard or saw — from my vantage point, I tried very hard to ignore as much media as possible, but I came away believing that Biden, Harris and Trump all ignored talking about the deficit, interest on the debt, inflation and the possibility of a weaker economy.
Instead, I thought I heard Harris talking about increasing the deficit and then I heard Trump talking about increasing the deficit.
None of the voters seemed to care and I think we all get what we deserve — my main take away, is that the deficit will be the star of the show — and we’ll get far more budget gridlock than anyone imagined. God bless the parliamentarian!
I’m actually thinking we all get a surprise with treasury yield cap control, Powell fired immediately and then acceleration of QT, then tax cuts — and musk acting as daddy trumps cheerleader, explaining to everyone why we have a new unexpected austerity plan, before we can make America a great place that doesn’t look like a casino filled with gangsters.
What a mess
Ah yes, “rock the boat” is a good strategy, as long as dead-in-the-water and seasick is the goal.
Reminder, Biden kept in place the trump tariffs on China, pretty much the only thing he carried over.
It is possible for both parties to support bad trade policy. They sometimes are fighting for political support from the same demographic.
“It is possible for both parties to support bad trade policy.”
Correct. Both parties energetically supported the same bad trade policies for the past four decades that have led to the gutting of American manufacturing, the destruction of US manufacturing infrastructure and knowhow, resulting in the horrendous trade deficits that we now have and the horrendous and strategically scary dependence on China and other countries. Only one President ever had the gumption to speak out against it, and to try to act against it, and ran smack into overwhelming political and institutional resistance, including from Corporate America, which had gotten immensely fat with these cheap-labor trade policies, and including from the media which created an endless flow of manipulative bullshit articles and videos, from the NY Times and the WSJ on down. These bad trade policies over four decades were not the fault of other countries. They were the fault of Corporate America and US politicians of both parties.
Most people, working and busy with family, etc., dont know the extent of mismanagement by tptb so they are less blame worthy Its the leaders job and responsibility to know and do whats right for the country so its they, the mismanagers, who are voting against their own self interests because to all comes a warner and a day of reckoning.
Jerome Powell is a former managing partner of The Carlyle Group, a really nasty PE firm. During the pandemic, they, along with many other PE firms and major banks took on loads of debt at almost zero percent interest rates to purchase “assets”.
With the rapid rise in interest rates over the past two years, Powell’s buddies on Wall St have been hurting financially due to having to pay back this debt at much, much higher interest rates. So it’s my opinion that he’s raising interest rates to appease his buddies.
Rates don’t need to be cut due to the still high (and higher) inflation. I’ll be shocked if he doesn’t cut another .25bps cut next week.
So much for us common folk.
The name of the game is keep the rich wealthy and the poor working.
People voted out the current administration because they are suffering under inflation, food, insurance, healthcare. Now it’s possible the new administration is going to have more inflationary policies.
Looking back the Fed should have been raising rates not lowering them. They needed to do a hard landing.
They influenced the election by not doing what needed to be done. Is it the fear of a crash and having to bail out the too big to fails again and knowing they can’t go back to their free money policies because of the inflationary results?
The crazy rise in the market will help out states that are especially dependent on capital gains. California gets about 11% of revenue from those but budgets are developed on constant revenue needed and 2022-23 wasn’t great for them. They will probably lose some interest income however with money put into treasuries.
Pretty bad combo for bulls on this inflation data mixed with the unemployment claims going up and revised up.
Don’t be surprised if yields drop before they pop
Lowering rates as inflation heats up again is exactly the wrong thing to do.
But the FED is obviously intent on doing it, so something else must be more important to the FED than inflation.
Will they tell us what it is, or make us guess?
Regardless, the consequences of their foolishness lie ahead for all is us.
Demand destruction is already taking place. Stores have lots of inventory, but fewer and fewer buyers.
Sure you can report higher sales even while you sell fewer items, but that strategy is ultimately self defeating, because at some point, rising prices aren’t enough to offset the fall in the number of units sold.
I can’t tell you when that will happen, but I don’t think that it will be far in the future.
Not cutting 25 basis points this month would be like replacing Hunter’s crack with Parmesan cheese.
We can’t afford another proxy war so let him smoke up.
One of the strangest things in the market has to be the fact that the Fed knows it has an inflation problem, U3 employment is ok, the market is at all time highs and folks are still spending like sailors on leave. So why is it cutting rates? Bank of Canada has the same issue and just cut fifty basis points. Why? Even stranger the funny socialist 51st state that hugs the border has its entire yield curve more than 100 basis points through treasuries. Talk about expensive bonds. Have fixed income traders abandoned the concept of relative value???The Fed and the BoC are both working with an implicit inflation target materially north of 2 percent and everyone knows it but they still want to own government long dated debt? Simply bizarre behavior or are fixed income trading now manned by teenagers trading crypto in their PA?
All the decisions seem entirely consistent given the concentration of wealth in this country and the pursuit of short term profits over sustainable goals. The economic and political systems are designed this way so any expectation to the contrary is wanting something we dream of but is unlikely to ever happen. Feels like part of the country recognizes this but just unclear as to how to right the ship. I know I certainly have no pragmatic answers, although if elected supreme leader I have plenty of ideas.