The inflation picture continues to improve.
New data A report from the Bureau of Labor Statistics released Wednesday showed that producer prices rose less than economists expected in November.
The “core” producer price index showed that prices excluding volatile food and energy categories were flat in November compared with the previous month, less than the 0.2% increase that economists had expected. On an annual basis, core prices rose 2%, below estimates for a 2.2% increase.
This, according to economists, would be a welcome sign for the Fed, as a lower PPI should mean the Fed’s preferred measure of inflation, core personal consumption expenditures (PCE), will come in lower than initially expected for November.
“Based on yesterday’s CPI inputs and today’s PPI, we estimate that core personal consumption expenditures will rise barely 0.1% during the month,” Neil Dutta, head of economics at Renaissance Macro Research, wrote on Wednesday. “If this is true, over the past six months, core personal consumption expenditures would have risen just 2.1% at an annual rate. In other words, we are right.” [near the Fed’s 2% inflation target].
“The Fed will need to revise its inflation estimates for 2023, but the momentum continuing into next year suggests a bit of downside there as well.”
For Dutta, the promising inflation news could mean more Fed rate cuts than initially expected in 2024 as well.
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