US producer prices post biggest gain in five months on services

[WASHINGTON] US producer prices recorded their biggest increase in five months in November amid rising costs for services, pointing to steadily rising inflation pressures.

The Labor Department said on Wednesday its producer price index for final demand increased 0.4 per cent last month, the largest gain since June, after being unchanged in October.

In the 12 months through October, the PPI rose 1.3 per cent, the biggest gain since November 2014. The PPI rose 0.8 per cent in the 12 months through October.

Economists polled by Reuters had forecast the PPI rising 0.1 per cent last month and accelerating 0.9 per cent from a year ago.

A 0.5 per cent increase in the cost of services accounted for more than 80 per cent of the rise in the final demand PPI last month. The increase, which followed a 0.3 per cent decline in October, was the largest since January.

Producer prices are rising as some of the drag from last year's plunge in oil prices continues to fade. Oil prices are hovering around US$50 per barrel, which could help offset some of the anticipated dampening impact on inflation from the US dollar's renewed strength.

The US dollar has gained 3.5 per cent against the currencies of the United States' main trading partners since the Nov 8 election of Donald Trump as the next president.

The greenback's rally had appeared to fade for much of the year Inflation is steadily moving toward the Federal Reserve's two per cent target.

Energy prices fell 0.3 per cent in November after climbing 2.5 per cent the prior month. Wholesale food prices rose 0.6 per cent after declining 0.8 per cent in October.

Healthcare costs gained 0.2 per cent last month after increasing 0.3 per cent in October. The cost of hospital inpatient care increased 0.2 per cent after rising 0.3 per cent in October. These healthcare costs feed into the Fed's preferred inflation measure, the core personal consumption expenditures (PCE) index.

Last month, the volatile trade services component - which measures changes in margins received by wholesalers and retailers - shot up 1.3 per cent. That was the biggest increase since January and snapped four straight months of declines.

A key gauge of underlying producer price pressures that excludes food, energy and trade services advanced 0.2 per cent. That followed a 0.1 per cent dip in October.

The so-called core PPI increased 1.8 per cent in the 12 months through November, the largest rise since August 2014. The core PPI increased 1.6 per cent in the 12 months through October.

REUTERS