U.S. wholesale costs rose sharply last month, showing that price pressures remain significant in the economy even as inflation has fallen from its peak level more than two years ago.
The Labor Department said Thursday that the producer price index, which tracks inflation before it reaches consumers, rose 0.4% last month from October, up from 0.3% the previous month.
Wholesale prices measured 12 months ago rose 3% in November, the largest year-on-year increase since February 2023.
So-called core producer prices, which exclude volatile food and energy prices, rose 0.2% from October 2023 and 3.4% from November.
Rising food prices pushed up wholesale inflation in November, which was higher than economists expected.
Wholesale food costs rose 3.1% from October due to higher prices for fruits, vegetables and eggs.
There was no change in the previous month.
The wholesale price report was released a day after the government reported that consumer prices rose 2.7% year-on-year in November, widening from October's 2.6% annualized rise.
The increase was driven by higher prices for used cars, hotel rooms and food, showing that rising inflation has not yet been fully contained.
The rate of increase in consumer prices has sharply declined from a 40-year high of 9.1% in June 2022.
But despite reaching relatively low levels, it has so far remained tenaciously above the Fed's 2% target.
Despite a modest rise in inflation last month, the Fed is poised to cut its benchmark interest rate for the third time in a row next week.
The Fed has raised key short-term interest rates 11 times in 2022 and 2023, reaching their highest level in 20 years, in an effort to reverse soaring inflation associated with an unexpectedly strong recovery from the coronavirus-induced recession. .
Central banks began reversing their moves in the fall as inflation steadily cooled.
In September, the Fed slashed the benchmark interest rate that affects many consumer and business loans by half a percentage point.
This was followed by a quarter-point rate cut in November.
These cuts brought the central bank's key policy interest rate down from 5.3%, the highest level in 40 years, to 4.6%.
The producer price index released on Thursday could provide an early indication of where consumer inflation is heading.
Economists are also watching the development as some of its components, particularly health care and financial services, are flowing into the personal consumption expenditures (PCE) index, the Fed's preferred inflation measure.
Despite the overall increase in producer prices, Capital Economics' Paul Ashworth said in commentary that the components of the PCE index were “generally weak” in November, leading to pointed out that the possibility of lowering the benchmark interest rate next week has increased further.
