Core US producer prices rose less than forecast in October

[NEW YORK] A key measure of prices paid to US producers decelerated in October, consistent with a pandemic that continues to limit pricing power.

The producer-price index excluding the volatile food and energy components rose 0.1 per cent from a month earlier, the smallest gain since June, after a 0.4 per cent advance, Labor Department figures showed Friday. The so-called core PPI rose 1.1 per cent from October of last year.

The overall producer-price index increased 0.3 per cent from September and 0.5 per cent from a year earlier. The advance from a month earlier exceeded projections as food prices jumped 2.4 per cent, the most since May. Energy costs rose 0.8 per cent, the most in three months.

The median forecast in a Bloomberg survey called for a 0.2 per cent increase in the core index and a 1.2 per cent gain in the PPI excluding food and energy from a year ago.

The figures suggest some producers are only somewhat successful in passing along higher raw materials costs to customers. Recent data have shown a deceleration in consumer prices, suggesting few risks of a surge in inflation in the near future. Reaching and exceeding the Federal Reserve's 2 per cent target on a sustained basis will likely be a slow process.

Producer prices excluding food, energy, and trade services - a measure preferred by economists because it strips out the most volatile components - rose 0.2 per cent in October from a month earlier after a 0.4 per cent gain in September. Compared with a year earlier, those costs climbed 0.8 per cent.

The cost of goods accelerated, rising 0.5 per cent after a 0.4 per cent increase, with higher food prices accounting for almost three-fourths of the gain. Excluding food and fuel, goods prices were unchanged.

The index for final demand services increased 0.2 per cent, the smallest advance in three months, after a 0.4 per cent gain. Over a quarter of the monthly gain was traced to higher costs for long-distance trucking, which increased 1.9%.

The report follows a separate Labor Department report a day earlier on consumer prices. The consumer price index was unchanged in October from a month earlier, the tamest reading since May.

BLOOMBERG