Wholesale Prices Moderate, Adding to Hopes That Inflation Is Waning

WASHINGTON — Wholesale prices increased less than expected in October, yet another indicator that inflation, which has stubbornly dogged the economy for much of the year, is finally beginning to wane.

The producer price index, a measure of the prices that companies get for finished goods in the marketplace, rose 0.2% for the month, at a time when most economists were predicting a 0.4% increase.

Responding to the Bureau of Labor Statistics report from Indonesia, President Joe Biden called the numbers “more good news for our economy.”

“Today’s news — that prices paid by businesses moderated last month — comes a week after news that prices paid by consumers have also moderated,” the president continued. “And, today’s report also showed that food inflation slowed — a welcome sign for family’s grocery bills as we head into the holidays.”

On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September and off the all-time peak of 11.7% hit in March. The monthly increase equaled September’s gain of 0.2%, the bureau said.

Excluding food, energy and trade services, the index also rose 0.2% on the month and 5.4% on the year. Excluding just food and energy, the index was flat on the month and up 6.7% on the year.

“Today’s PPI report has given us confidence that inflation can fall more quickly than the market had been expecting. In turn this will give the Federal Reserve the flexibility to respond with stimulus should a 2023 recession materialize,” said an analysis of the PPI report from ING, the Dutch multinational banking and financial services corporation headquartered in Amsterdam.

“Falling commodity prices and the effects of earlier energy price falls have been very helpful and together with the strong dollar and falling freight costs has meant imported prices are receding quite rapidly now,” the analysis said. “Indeed, freight costs from China to the U.S. are now pretty much back to pre-COVID levels, suggesting supply chain frictions caused by logistic issues have abated to a large extent. This is all very helpful to reduce corporate input costs, which in turn reduces the pressure for companies to raise prices for consumers.”

To the president, the bottom line on the latest report on the economy was easy to decipher.

“My economic plan is showing results, and we face global economic challenges from a position of strength,” he said. 

“As I said last week, it will take time to get inflation back to normal levels — and we could see setbacks along the way — but we will keep at it. And I want to repeat that I will work with anyone — Democrats or Republicans — who have ideas on how we can provide more breathing room to middle-class and working families.”

Dan can be reached at [email protected] and at https://twitter.com/DanMcCue