Following yesterday’s reported re-ignition in consumer price inflation (despite people seemingly being exuberant that it was ‘as expected’ – we don’t remember The Fed’s mandate being stable prices in line with consensus expectations?), this morning’s producer prices were expected to accelerate further also to +2.6% YoY from +2.4% YoY.

But it didn’t…

Headline PPI surged 0.4% MoM (+0.2% MoM exp) – biggest MoM jump since June – which lifted the YoY rise in producer prices to +3.0% – far above expectations and the highest since Feb 2023…

Headline PPI’s big jump was driven by food costs (rising at their fastest since Nov 2022)…

A quarter of the November rise in prices for final demand goods is attributable to a 54.6-percent jump in the index for chicken eggs.

Prices for fresh and dry vegetables, fresh fruits and melons, processed poultry, non-electronic cigarettes, and residential electric power also increased. In contrast, the index for oilseeds declined 4.7 percent. Prices for diesel fuel and for primary basic organic chemicals also decreased.

Services costs are accelerating fast on a YoY basis and Energy’s deflationary pressure is evaporating rapidly…

Not only was much of the PPI report better than expected, the underlying components were too.

The percentage of those rising on an annual basis is at 80%.

As the chart shows, this is typically consistent with PPI remaining elevated.

Spot the difference (food costs just hit a new record high)…

Core PPI (ex-food and energy) rose 0.2% MoM as expected but the YoY core PPI jumped dramatically to +3.4% YoY – also the hottest since Feb 2023…

Most problematically, businesses will start to face margin pressure going forward… or they will have to raise prices…

Given the resurgence in money supply, it should not be a surprise that PPI (and CPI) are on the rise again…

Does that look like an inflationary backdrop that needs a rate-cut next week?