Prices for final demand goods and services rose 0.2% in October, matching the rate in September, according to the Bureau of Labor Statistics. NAM Chief Economist Chad Moutray broke it down for us.
Under the hood: “At the same time, producer prices for final demand goods increased 0.6% in October, picking up from 0.3% in September, largely on higher energy costs, which were up 2.7%,” said Moutray.
- “Food prices were also higher, up 0.5% for the month.”
- “Excluding food and energy, producer prices for final demand goods edged down 0.1% in October, the first negative reading since May 2020.”
The long game: “Over the past 12 months, producer prices for final demand goods and services have risen 8.0%, down from 8.4% in September and the lowest in 15 months,” said Moutray.
- “Core producer prices increased 5.4% year-over-year, down from 5.6% in August and September and continuing to decelerate since hitting a record 7.1% in March.”
What it means: “The deceleration in producer price growth is encouraging, even with raw material costs remaining at very elevated levels,” said Moutray.
- “Manufacturers cite rising raw material costs as one of the top challenges, along with supply chain and workforce concerns, and signs of slower inflation are entirely welcome.”
Eyes on the Fed: “For its part, the Federal Reserve will continue to fight inflationary pressures in the economy,” said Moutray. “Yet, after four straight 75-basis-point hikes in the federal funds rate, the Federal Open Market Committee will likely step back to a 50-basis-point increase at the upcoming Dec. 13–14 meeting.”
- “The FOMC will then go on to enact 25-basis-point increases at each of the following two meetings (Jan. 31–Feb. 1, 2023, and March 21–22, 2023),” said Moutray.