Wholesale prices rose less than expected in October, adding to hopes that inflation is easing, the Bureau of Labor Statistics reported on Tuesday.
The product price index, a measure of the prices companies get for finished goods on the market, rose 0.2% for the month, compared with Dow Jones estimates of a 0.4% increase.
Stock futures tied to the Dow Jones Industrial Average rose more than 400 points shortly after the release, reflecting market anticipation that cost-of-living increases not seen since the early 1980s were abating if not retreating.
On a year-over-year basis, the PPI rose 8% compared with an 8.4% increase in September and off an all-time high of 11.7% in March. The monthly increase matched September’s 0.2% gain.
Excluding food, energy and trade services, the index also rose 0.2% in the month and 5.4% in the year. Excluding only food and energy, the index was flat for the month and grew 6.7% for the year.
One of the main causes of the slowdown in inflation was the 0.1% drop in the services component of the index. This marked the first outright decline for this measure since November 2020. Prices for final demand for goods rose 0.6%, the biggest gain since June, which was mainly due to a pick-up in energy, which meant a 5.7% increase in gasoline.
The slowdown came despite a 2.7% increase in energy costs and a 0.5% increase in food.
The index is generally considered a good leading indicator of inflation, as it measures the prices of pipelines that eventually reach the market. The PPI differs from the more closely followed consumer price index in that the former measures prices received by wholesale producers, while the CPI reflects what consumers actually pay.
Hopes that inflation will at least slow rose last week when the CPI showed a monthly gain of 0.4%, less than the estimate of 0.6%. The 7.7% annual gain was a slowdown from the 41-year high of 9% in June. Markets also rallied after Thursday’s CPI release.
Federal Reserve officials have raised interest rates in hopes of reducing inflation. The central bank has raised its benchmark borrowing rate six times this year to a total of 3.75 percentage points, its highest level in 14 years.
Vice President Lael Brainard said Monday that she expects the pace of hikes to slow soon as rates are likely to go even higher. He said the Fed may move to a more “deliberate” stance as it watches the impact its rate hikes, which have included four consecutive 0.75 percentage point increases, have on financial conditions.
In other economic news Tuesday, the New York Fed’s Empire State manufacturing survey for November came in at a reading of 4.5%, up 14 percentage points on the month and much better than the estimate of ‘a reading of -6%. The index measures the difference between companies reporting expansion and contraction.
However, both prices paid and received have experienced increases, 1.9 points and 4.3 points respectively.