The Bureau of Labor Statistics reported that producer prices rose 0.3 percent in November, offsetting the 0.3 percent decline from October. Higher food costs were behind this increase, rising 1 percent for the month. Energy costs were up a more modest 0.1 percent, and the core inflation rate – which excludes food and energy costs – increased 0.1 percent. Looking at year-over-year data, producer prices for finished goods have risen 6.9 percent since November 2010, with core inflation growing 2.9 percent. Core prices have risen ever-so-slightly during the course of 2011.
For manufacturers, the cost of manufactured goods increased 0.3 percent, reversing the previous month’s decline. Over the past 12 months, the price of finished manufactured goods was up 7 percent. This year-over-year figure has been declining in recent months, which is welcome news for manufacturers who have cited elevated costs as a major concern.
Looking at specific manufacturing sectors, the largest monthly gains were seen in petroleum and coal products (up 1.3 percent), food manufacturing (up 0.7 percent) and apparel (up 0.5 percent). Sectors with the biggest producer price declines for November included primary metals (down 1.1 percent), textile product mills (down 0.8 percent) and leather and allied products (down 0.7 percent).
Higher food and energy costs helped to push up producer prices at the intermediate and crude levels. Given the recent increases in petroleum prices per barrel, it is not surprising that crude energy costs rose 10.5 percent, with intermediate prices for energy up 1.9 percent. Still, core intermediate and crude prices at the producer level were negative, down 0.4 percent and 2.5 percent, respectively. This suggests that there were little inflationary pressures outside of food or energy.
This report suggests that producer prices are up modestly in November, with core inflation below 3 percent. There have been signs of easing in recent months, with year-over-year changes edging lower. Yet, higher food and energy costs are beginning to creep into prices at the intermediate and crude levels, suggesting the potential for higher finished goods prices in December and beyond.
The longer-term outlook for 2012 suggests continued modest growth in inflation next year, however, and the Federal Reserve appears more concerned with global economic growth than inflationary pressures.
Tomorrow, we will receive new data from BLS on consumer prices, which are expected to reflect similar trends.
Chad Moutray is chief economist, National Association of Manufacturers.