Producer Prices (Nov)

Ignore the fact that PPI final demand prices increased by a slightly bigger than expected 0.4% m/m in November. The components that feed into the Fed’s preferred PCE index were universally weak and, together with the CPI data released yesterday, point to a muted 0.03% m/m increase in the core PCE index. (That’s 0.4% in one-month annualised terms). Even allowing for the possibility of an upward revision to the October PCE data, based on revisions to the PPI figures, it now looks even more likely that the Fed will follow through with another 25bp rate cut next week.