Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  The Producer Price Index (PPI) Rose 0.8% in November
Posted Under: Data Watch • Government • Inflation • Markets • PPI • Fed Reserve • Interest Rates • Spending • Bonds • Stocks • COVID-19
Supporting Image for Blog Post

Implications:  Producer prices continue to rise at the fastest pace in decades, up 0.8% in November and 9.6% in the past year, with little sign inflation pressures are going to ease.  As the Fed begins meeting today, the data on consumer prices (released last Friday) and producer prices should all but cement an acceleration in the tapering of asset purchases in preparation for possible rate hikes in 2022.  The Fed has finally acknowledged that inflation is not "transitory" as it said time and time again during the last eighteen months.  The December 2020 forecast from the Fed for inflation in 2021 to come in at 1.8% shows its models fundamentally misunderstand the drivers of sustained inflation.  Yes, supply-chain issues continue to exert upward pressure on prices.  From the shortage in semiconductors to difficulties finding labor, supply simply hasn't kept up with demand.  And while the port congestion gets the news coverage, each step in the distribution process – from drivers to move loads out of the ports, trains available to move them across the country, and staff available to unload at warehouses – faces difficulties trying to meet demand.  But supply-chain issues will ultimately prove temporary. What is not temporary is the huge increase in the M2 money supply – now 39% above pre-COVID levels – which will drive inflation over the longer term.  In terms of the details for November, prices for both goods and services ran well above the historical pace, up 1.2% and 0.7%, respectively, in November.  Energy prices continue to surge, rising 2.6% in November and up 43.6% in the past year, while food prices are up double-digits over the past twelve months, as well.  But even stripping out the typically volatile food and energy components shows "core" prices rose 0.7% in November and are up 7.7% in the past year.  It simply doesn't matter how you cut it or which inflation gauge you prefer, they all show that Washington's response to COVID has put the Fed behind the curve.

Click here for a PDF version 
Posted on Tuesday, December 14, 2021 @ 10:27 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.