U.S. producer prices jumped 2.4% from a year ago which was the largest increase in 14 months. The rise follows last month’s -1.9% reading and far exceeded economists forecast for a 1.8% gain. Prices during November soared by 1.8% the most since November, 2007 led by a 14.2% surge in gasoline costs. Despite the gain in the volatile energy component broader appreciation was also evident with the core reading rising to 1.2% from 0.7% as consumer goods increase by 2.3%. The improving global economy has raised the costs for inputs but the question remains can manufacturers pass those costs onto consumers who are just starting to show life. This wasn’t the case for New York producers as the Empire manufacturing reading showed the gauge for price received fall to -9.21 from -2.63 leading the headline reading lower to 2.55 from 23.51. Economists were expecting a rise to 24.00 but declines in unfulfilled orders and number of employees added to the disappointing result. The contraction in activity underlines the central bank’s concerns over future growth and diminishes the relevance of the inflation data on future monetary policy. Policy makers have maintained their stance that they will keep rates low for the foreseeable future with markets pricing the greatest chance for a rate hike in June. However, if we see consumer prices follow the same path and show consistent appreciation then the Fed’s hand may be forced. We saw very little price action to the conflicting data as markets may be waiting for the upcoming industrial production numbers.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.
