U.S. wholesale prices increased less than expected in October, even as the annual rate climbed to its highest level in nearly four years and traders kept pricing in a Federal Reserve rate increase next month, CNBC reported.
The producer price index, which measures the prices domestic producers get for their products before they reach the consumer, rose a seasonally adjusted 0.3 percent for the month, against the Dow Jones consensus for a 0.4 percent increase, the Bureau of Labor Statistics reported Friday. Stripping out food and energy, core PPI posted a 0.3 percent gain, meeting expectations. On an annual basis, headline PPI accelerated 6.5 percent, up 0.2 percentage point, for the highest annual rate since November 2022.
The report comes a few weeks ahead of the Federal Reserve's next policy meeting on Dec. 8-9. After the data, CNBC said markets were fully pricing in a quarter-point increase in the central bank's key overnight rate, with slight odds that the Federal Open Market Committee might opt for a half-point hike. Stock market futures added to gains following the release, while Treasury yields were mixed.
Yields already pointed to a December move
Earlier Friday, before the PPI report, Treasury yields had edged higher as investor expectations for a December hike gathered strength. The 10-year U.S. Treasury note yield, a key benchmark for mortgages, auto loans and credit card debt, rose 2 basis points to 5.1271 percent. The 30-year yield was 3 basis points higher at 5.4602 percent. The 2-year yield, which is typically more sensitive to near-term Fed decisions, was 1 basis point lower at 4.8525 percent.
Those moves followed a sharp Thursday session in which the 10-year yield jumped more than 13 basis points to more than 5 percent, and the 2-year yield soared more than 15 basis points, CNBC reported. Traders were pricing in 100 percent odds of a rise at the Dec. 9 meeting, according to the CME Group's FedWatch tool, with odds of a 25-basis-point hike at almost 87 percent and a 50-basis-point increase around 13 percent. The earlier yields story had expected October PPI to show 0.4 percent monthly growth, compared with 1.3 percent in September; the official print came in a tenth lighter than that forecast, but the 6.5 percent annual rate was still the highest since late 2022.
Energy prices remained in focus. CNBC said oil was set for its second weekly decline as prospects of renewed U.S. strikes against Iran receded. Early Friday, U.S. West Texas Intermediate futures for December delivery were down 0.1 percent at $88.63 a barrel, and Brent crude was higher by 0.3 percent at $96.11. A softer-than-expected monthly PPI print did not, on its own, take a December hike off the table.