A key inflation report indicates that rate hikes by the central bank will begin to dampen prices

CNN Business

A key measure of inflation, wholesale prices, rose 8% in October, according to the latest report from the Bureau of Labor Statistics.

Although still historically high, it was the smallest increase since July last year and significantly better than forecasts. It was the second inflation report this month that showed signs of a cooling of inflation that has weighed on the economy.

Economists expect the producer price index, which measures the prices paid for goods and services before reaching consumers, to show an annual increase of 8.3%. Down from September 8.4% revised.

On a monthly basis, producer prices rose 0.2%, also below expectations A revised 0.2% increase seen in September.

Year-on-year, core PPI – excluding food and energy, the components most prone to market volatility – measured 6.7%, down from September’s revised annual increase of 7.1%.

On a month-on-month basis, core PPI prices were flat, the lowest monthly reading since November 2020. In September, core PPI increased by a revised 0.2% from the previous month.

Economists had expected annual and monthly core PPI to measure 7.2% and 0.3%, respectively, according to Refinitiv’s estimate.

President Joe Biden announced the October PPI report on Tuesday, “more good news for our economy this morning, and more signs that we are starting to see inflation moderate.”

“Today’s news — prices paid by businesses last month — comes a week after news that prices paid by consumers also moderated,” Biden wrote on Tuesday. “Furthermore, today’s report shows that food inflation has moderated — a welcome sign for household grocery bills during the holidays.”

For most of this year, the Federal Reserve has tried to reduce decades-high inflation by tightening monetary policy in an unprecedented manner. Four consecutive rate hikes of 75 basis pointsor three-quarters of a percentage point.

The better-than-expected PPI data reflects that the economy is slowing, with supply moving further into balance, said Jeffrey Roche, chief economist at LBL Financial.

Costs related to transportation and warehousing, for example, fell for the fourth month in a row, he said, possibly as a result of the improving global shipping climate. Manufacturer spending on new cars fell sharply after May 2017.

“Barring geopolitical or financial crises, inflation should continue its decline in 2023,” he said in a statement.

Because the PPI captures price changes occurring further upstream, the report is considered by some to be a leading indicator of broader inflation trends and a predictor of what consumers will eventually see at the store level.

“The PPI reading certainly adds more fuel to the fire for those who think we may be on a downward inflation trend,” Mike Lowengard, head of model portfolio construction at Morgan Stanley, said in a statement.

Last week’s Consumer Price Index Inflation eased to 7.7% The 8.2% annual gain for consumer goods surprised investors and gave Wall Street its biggest boost since 2020.

CPI data “reassuring” Fed Vice President Lael Brainard said MondayRate hikes appear to be taking hold, and if economic data continues to show inflation slowing, the central bank may reduce the size of its future rate hikes.

“When you look at the inflation numbers, there’s some evidence that we’ve peaked, but we’re coming down quickly?” Steven Ricciuto, chief economist at Mizuho Americas, told CNN Business.

Ricciuto noted that the October figures were two steps lower than those seen in September.

“These are not things that tell the Fed to stop tightening rates,” he said. However, “they can tell you [that] You don’t need 75 basis points.

CNN’s DJ Judd and Matt Egan contributed to this report.

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