The Good and the Bad of Today's PPI Release... December 9th, 2022

The BLS has released the November Producer Price Index Report. (historical releases)

The Producer Price Index for final demand advanced 0.3 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices also rose 0.3 percent in both October and September. (See table A.) On an unadjusted basis, the index for final demand moved up 7.4 percent for the 12 months ended in November. 

A little further in the report...

Product detail: The November advance in prices for final demand goods was led by a 38.1-percent jump in the index for fresh and dry vegetables. Prices for chicken eggs; meats; canned, cooked, smoked, or prepared poultry; and tobacco products also moved higher. Conversely, the gasoline index fell 6.0 percent. Prices for diesel fuel, residential natural gas, and primary basic organic chemicals also declined. [emphasis added]

Overall, a very good report, unless you are below average income. Which means food prices are not slowing anytime soon. Across the board, the total goods less foods and energy inputs is down, by an average of -0.3%, compared to -0.1% last month. Good news, with the energy components down -4.25%, compared to -3.2% last month. However, with energy down -4.25% and the total good, ex-F&E at -0.3%... guess what? Food jumped +0.4%, whereas last month it was down -3.2%.

Drought conditions are pushing up several categories. If the drought were to end tomorrow, it would still take several months to restock the supply chain. In the interim, expect grocery prices to continue upward, regardless of FED easing or tightening. 

If you are above average income and/or investing in stocks, etc., this report is indeed good news. On the other hand, if you are below average income, this report indicates some bare cupboards in the offing, in my humble opinion.

Remember most of the harvest is now in the bins, with feedstocks for livestock known and those livestock mostly culled to match that over winter feedstock. 

The outlook is not positive for a reduction in food inflation. Will energy prices continue to fall into the coming year?