Producer Prices: Goods Still Hot, Services Drive Surprise

Bottom Line:  Producer prices rose more than expected in November as good prices continued to see upward pressure, and services prices rose sharply more than expected. There were also upward revisions to prices for October. Final demand services were up 0.7% in November, led by gains in financial services, especially portfolio management services, as well as those related to travel, including guestroom rentals and airline services. Despite the upside surprise continued record readings on a year-on-year basis, the trends at both the headline and core levels are still decelerating slightly after upward momentum peaked this summer. That said, goods inflation is still accelerating, especially for intermediate goods related to manufacturing and construction. Overall, producer prices pressures remain historic, but the November report's surprise was skewed even higher by services categories that are typically quite volatile.The PPI ROSE by 0.8% in November, compared with market expectations for an increase of 0.6%. Overall producer prices are 9.7% ABOVE the year-ago level.
 
The Goods PPI ROSE by 1.2% in November and is now 15.1% ABOVE its year-ago level. Food prices rose by 1.2% and are now 11.7% ABOVE their year-ago level.  Meanwhile energy prices rose by 2.6%. and are now 43.8% ABOVE their year-ago level. The Goods PPI less food and energy  ROSE by 0.8%,  and is now 9.4% ABOVE its year-ago level.
 
The Services PPI ROSE by 0.7% in November and is now 7.0% ABOVE its year-ago level.
 
The Core PPI ROSE by 0.7%, compared with market expectations for a increase of 0.5%.  Core producer prices are now 7.8% ABOVE their year-ago level.