By Thomson Reuters – Re-Blogged From Newsmax
U.S. producer prices rose more than expected in October, driven by a surge in the cost of services, and there were also signs of steady increases in underlying wholesale inflation.
The Labor Department on Tuesday said its producer price index for final demand increased 0.4 percent last month after a similar gain in September. In the 12 months through October, the PPI jumped 2.8 percent, which was the largest increase since February 2012. The PPI rose 2.6 percent year-on-year in September.
Prices for services advanced 0.5 percent last month after increasing 0.4 percent in September. A 24.9 percent surge in margins for fuels and lubricants retailing accounted for almost half of the increase in the cost of services last month.
That helped to offset a 4.6 percent drop in the cost of gasoline. Wholesale gasoline prices soared 10.9 percent in September in the aftermath of Hurricane Harvey, which struck Texas in late August and reduced refining capacity in the Gulf Coast area.
A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent last month. It has increased by the same margin for three straight months. The so-called core PPI increased 2.3 percent in the 12 months through October after advancing 2.1 percent in September.
Inflation has remained stubbornly low, despite the labor market nearing full employment. The main inflation measure tracked by the Federal Reserve has remained below the U.S. central bank’s 2 percent target since mid-2012.
Despite moderate price pressures, the Fed is expected to raise interest rates next month. There is cautious optimism that tightening labor market conditions will spur faster wage growth next year.