Today's U.S. November PPI report
Today's U.S. November PPI report undershot estimates with a flat headline figure and a -0.2% core price drop. Weakness was due to a -0.3% service sector decline that was spread across the service components, alongside a largely expected 0.3% goods price rise that was lifted by increases of 0.6% for energy and 1.1% for food. On the old SOP basis analysts saw a big 0.5% November PPI headline rise that extended a 0.8% October surge, as goods and service sector prices diverged. Headline PPI gains have undershot CPI gains through 2019, and analysts have a 2019 down-tilt for monthly PPI gains despite an up-tilt for CPI gains. For PPI analysts have 6-month average price gains of just 0.028% for both the headline and the core that undershoot respective 12-month average gains of 0.092% and 0.107%. Any upward inflation pressure on the U.S. inflation indicators from tariff hikes has thus far been hard to see, beyond price gains for some individual price categories targeted with tariffs. November price restraint will limit the likely uptrend in y/y PPI gains between November and February, as analysts switch from easy to hard comparisons attributable to last year's big commodity price drop. The y/y uptrend into Q1 will support the Fed's policy pause, as a climb in the various metrics toward the 2% objective will make it hard to argue for a "material change" in the inflation outlook.