Producer Price Inflation Accelerates at the Start of Q4

Wells Fargo Research Team Wells Fargo

Driven by trade services, but showing gains elsewhere, headline PPI increased a stronger-than-expected 0.4 percent in October. Core producer prices were also up solidly on the month, supporting firming inflation.

Trade Services Led the Charge

For the second consecutive month, PPI-final demand beat expectations in October. Trade services led the charge, up 1.1 percent, with nearly half of the increase attributed to retailer fuel margins. Wholesale energy prices were flat following solid gains in the prior two months, and wholesale food prices increased 0.5 percent. Core goods prices posted another solid monthly performance, largely due to higher pharmaceuticals.

PPI Supports Our Moderate Inflation Outlook

Core producer prices, excluding energy, food and trade services, increased 0.2 percent for the third straight month. The yearover- year pace reached a fresh record high at 2.3 percent.
While not the primary measure of inflation, the consistent gradual improvement in producer prices over the past two years will be welcomed by Fed officials who, on balance, continue to express confidence in a gradually rising inflation outlook.

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Wells Fargo Research Team

Wells Fargo

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