Wholesale inflation, as measured by the producer price index, declined to 0.9% for the year ending in November as the Federal Reserve keeps interest rates high.
The new numbers were released on Wednesday by the Bureau of Economic Analysis. The decline came after a notable decrease the month before and is welcome news for the economy, which has been strained under the burden of inflation.
On a month-to-month basis, the wholesale price index was flat at 0%.
This latest numbers are an indication that inflationary pressures are continuing to weaken amid the Fed tightening and come a day after the even-more-closely-watched consumer price index also posted a decline.
INFLATION FALLS TO 3.1% IN NOVEMBER IN POSITIVE SIGN FOR ECONOMY
Inflation as measured by the CPI fell by a tenth of a percentage point to 3.1% for the year ending in November. A notable share of that decrease was due to declining energy prices, which had been putting upward pressure on the headline CPI number. On a month-to-month basis, CPI inflation growth was at 0.1% — which was a bit higher than forecasters had expected.
This latest PPI data coupled with the CPI data will provide the Fed with its last snapshot of the country’s inflation situation before it makes its next interest rate decision later on Wednesday.
The overwhelming majority of investors expect that the central bank is done with its tightening cycle, which has the target rate now placed at 5.25% to 5.50%. That is the highest interest rates have been since around the time of the financial crisis, causing pain for consumers already dealing with too-high inflation.
The consensus has been forming in recent weeks that the central bank will begin pruning its target rate sometime next year, perhaps as early as the first quarter — a prospect that investors are hoping for.
The labor market has particularly remained strong despite the high-interest rate environment. The economy once again beat expectations in November and added nearly 200,000 more jobs, and the unemployment rate dropped slightly to 3.7%, which is considered a healthy level by historical standards.
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In addition to the ability for people who want jobs to get them, the overall economy has also expanded at a surprising rate over the past year in defiance of the high interest rates.
A revision to the third-quarter GDP projections released last month showed that economic growth expanded at a 5.2% seasonally adjusted annual rate in the third quarter of this year, the strongest growth since the pandemic rebound and, before that, 2014.