Another Day, Another Bad Inflation Number | National Review

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Federal Reserve Chairman Jay Powell (Al Drago/Reuters)

I’m still pretty confident that inflation will ease off from its current high levels in due course, if not to the levels we were seeing a couple of years ago.

But the term “in due course” is doing quite a bit of work here. Producer prices provided the latest grim set of numbers today.


Wholesale prices rose 9.6% from a year ago, the highest level going back to November 2010.

If November 2010 doesn’t sound too bad, that may be misleading. That was when these data started to be presented this way.

It’s more important to note that, as with the CPI (6.8 percent against expectations of 6.7 percent), these results were worse than expected (expectations had been for around 9.2 percent).

For those looking for some comfort (and it’s not much comfort), there’s this (tucked away at the end):

Excluding food, energy and trade services prices rose 0.7% for the month, putting core PPI at 6.9%, also the largest gain on record. Estimates were for respective gains of 0.4% and 7.2%, meaning the monthly gain was faster than estimates but the year-over-year measure was a bit slower.

Other than the fact that numbers for the “unadjusted” PPI came in worse than expected, perhaps the most interesting (and ominous) piece of data was this:

Demand for goods continued to be the bigger driver for producer prices, rising 1.2% for the month, a touch slower than the 1.3% October increase. Final demand services inflation ran at a 0.7% monthly rate, much faster than the 0.2% October rate and a sign that the services side could be catching up in prices after lagging through much of the recovery.

How that will be affected by Omicron (and, critically, the response to Omicron) remains to be seen.

The Bureau of Labor Statistics (BLS) has described the price increases as “broad based.” That seems fair.


Final demand energy prices jumped another 2.6% in November despite sliding crude prices, while food was up 1.2%. Transportation and warehousing increased 1.9%, while portfolio management spiked 2.9%.

Elsewhere, iron and steel scrap prices surged 10.7%, and a host of others costs including gasoline, fruits and vegetables and industrial chemicals also increased. Diesel fuel costs were down 2.6% for the month, while chemicals and allied products wholesaling declined 1.3%.

The Fed is meeting today and Wednesday. The PPI numbers will add to the pressure for the central bank to signal tomorrow that it is getting out of the QE business earlier than scheduled, something that Powell has essentially already flagged.

The Financial Times (December 12):

During congressional hearings earlier this month, the Fed chair signalled his support for wrapping up the so-called taper “perhaps a few months sooner” than initially planned. Market expectations immediately adjusted, with investors pricing in the first interest rate increase in June, with at least one more slated for later in the year.

More than half of the 48 economists who participated in a recent survey conducted by the Financial Times and the Initiative on Global Markets at the University of Chicago Booth School of Business said it was “somewhat” or “very” likely the Fed would stop adding to the size of its balance sheet by the end of March.

That may allow for a rate increase as early as the first quarter, which 10 per cent of the respondents thought plausible. The majority, however, say the Fed will move in the following quarter.

The best (and not very controversial) guess is that Powell will give a far clearer indication that end of March is a likely date, although that still seems on the leisurely side to me.

The FT:

White House officials, like most economists, expect inflation to moderate next year, but there is significant uncertainty about when exactly this will begin.

“Significant uncertainty” is, in its own bleak way, rather more convincing than “transitory” (R.I.P.).

Note: The figures given for November CPI have been corrected. 


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About the Author

Tony Beasley
Tony Beasley writes for the Local News, US and the World Section of ANH.