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Consumer prices dropped for gasoline by -2.4% in October, helping to keep the consumer price index (CPI) down to a +0.1% rise. The food component of the index remained unchanged for the second month in a row, while the energy component decreased -1.0% after increasing in August and September. Core CPI inflation, which excludes food and energy, was up +0.2% after a +0.1% September increase, with prices rising for shelter (+0.3%), medical care (+0.3%), cell phone services (+0.4%), and lodging away from home (+1.6%). Prices for used vehicles increased by +0.7% after nine consecutive months of declines, but prices for new cars fell -0.2%, continuing declines from October. On a yearly basis, core CPI increased from +1.7% to +1.8%, closing in on the Fed’s +2.0% target.
The final demand producer price index (PPI) rose by an unexpectedly strong +0.4%, with the services component up +0.5% and the goods component up +0.3%, bringing unadjusted yearly PPI up by +2.8% for the largest increase since February 2012. Almost half of the services gain was due to a +24.9% jump in margins for fuel and lubricants retailing. For goods, fuel prices dropped -4.6% after September’s hurricane related spike, but this was more than offset by a +2.1% increase in pharmaceutical preparations and a +0.5% increase for foods. Removing the volatile food, energy and trade services components lowers core PPI to +0.2%, the same rate as September, but increases the yearly rate by +0.2% to +2.3%.
Industrial production also rose by a stronger than expected +0.9%, with the manufacturing component revised upward to +0.4% for September and +1.3% growth in October. The Federal Reserve attributed a -1.3% drop in mining output to drops in oil and gas production to Hurricane Nate, and categorized October’s overall boost in productivity as a return to normal operations after Hurricanes Harvey and Irma suppressed activity in August and September; excluding the effects of the hurricanes, they estimated overall output increased +0.3%, and manufacturing increased +0.2%. Manufacturing capacity utilization was up +2.0% to 76.4%, and the largest increases in manufacturing output were for chemicals (+5.8%), petroleum and coal products (+4.0%), textile and product mills (+1.6%), apparel (+1.3%), and motor vehicles (+1.0%), with a significant drop only for plastics and rubber products (-0.9%). On a yearly basis, overall industrial production grew +2.9%, manufacturing grew +2.5%, mining increased +6.4%, and utilities were up +0.9%.
Wednesday November 22 – Durable Goods Orders
Wednesday November 22 – Federal Open Market Committee (FOMC) Minutes