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US producer prices post biggest annual gain in nearly six years

[WASHINGTON] US producer prices rose in November as gasoline prices surged and the cost of other goods increased, leading to the largest annual gain in nearly six years and pointing to a broad acceleration in wholesale inflation.

The Labour Department on Tuesday said its producer price index for final demand increased 0.4 per cent last month. The PPI has now increased by the same margin for three straight months.

In the 12 months through November, the PPI shot up 3.1 per cent. That was the biggest gain since January 2012 and followed a 2.8 per cent rise in October. Economists polled by Reuters had forecast the PPI rising 0.3 per cent last month and increasing 2.9 per cent from a year ago.

The strong rise in the PPI supports views that weak inflation readings experienced through the first half of the year have probably run their course. The PPI report was released as Federal Reserve officials prepared to gather for a two-day policy meeting.

Some policymakers had worried that the factors that had held down inflation early in the year could become more persistent. The US central bank tracks the personal consumption expenditures (PCE) price index excluding food and energy, which has undershot the Fed's 2 per cent target for nearly 5-1/2 years.

The Fed is expected to raise interest rates on Wednesday, for a third time this year, with a robust labor market and strengthening economy expected to overshadow policymakers'earlier concerns about tame inflation.

Last month, gasoline prices surged 15.8 per cent, the biggest gain since August 2009, after dropping 4.6 per cent in October. Gasoline accounted for two thirds of the 1.0 per cent increase in the final demand goods index.

Wholesale food prices rose 0.3 per cent in November after increasing 0.5 per cent in October. Prices for services increased 0.2 per cent last month after increasing 0.5 per cent in October.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.4 per cent last month. The so-called core PPI had increased by 0.2 per cent for two straight months.

It rose 2.4 per cent in the 12 months through November, the largest gain since the series started in August 2014. The core PPI increased 2.3 per cent in the 12 months through October.

Core goods increased 0.3 per cent in November, rising by the same margin for a third consecutive month. Prices for passenger cars increased 0.5 per cent last month, the largest increase since December 2016, after being unchanged in October.

The cost of healthcare services was unchanged last month after 0.3 per cent in October. Those costs feed into the core PCE price index.