·
The November Producer Price Index reversed the prior month's gain and
fell 0.7%. The decline was the largest for any month since April 2003
and slightly exceeded Consensus
expectations for a 0.5% drop.
· In a reverse of the prior month's strength, home heating oil prices fell 15.5% (+30.5% y/y) and natural gas prices declined 0.5% (+31.0% y/y), both seasonally adjusted. Gasoline prices added to the prior month's drop with a 10.7% (+19.4% y/y) decline.
· "Core" producer
prices edged up 0.1% following the prior month's 0.3% decline and the
rise fell short of Consensus expectations for a 0.2% increase.
· Prices of finished consumer goods less food & energy rose 0.2% (2.0% y/y) and the gain was driven by a 0.5% (3.7% y/y) surge in core consumer nondurable goods prices. Durable goods prices fell another 0.2% -0.2% y/y) on top of the 0.9% October decline led by passenger car prices which fell 0.8% (-3.2% y/y). Capital equipment prices fell for the third month in the last four led by a 0.8% (-4.1% y/y) decline in truck prices.
· Intermediate goods prices reversed only some of the prior month's strength with a 1.2% decline. Core intermediate goods prices remained firm and rose 0.5% on top of two months of 1.2% gain.
· Crude energy prices similarly remained firm. The 1.2% decline in the total only dented the strong gains during four months because core crude prices soared 5.4% led by an 18.8% (-14.4% y/y) surge in iron & steel scrap prices. During the last thirty years "core" crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
· Inflation Targeting under Commitment and Discretion from the Federal Reserve Bank of San Francisco can be found here.