November PPI rose by .4% m/o/m for the 3rd straight month taking the y/o/y gain to 3.1% vs the estimate of 2.9%. That is up from 2.8% and go back 6 years to see a faster pace of gain. Energy was certainly a main factor as it rose by 4.6% m/o/m but goods prices ex energy were still up .3% m/o/m while services inflation was up by .2% m/o/m after a jump of .5% in October and .4% in September. Versus last year, goods prices ex energy were up 2.6% and services ex trade was up by 2.4%.
Prices in the pipeline also rose. Prices for processed goods rose .5% m/o/m. They were up 3.2% m/o/m for unprocessed goods and for services prices were up .7%.
Bottom line, supply constraints, higher commodity prices, and maybe firmness in wages, are filtering its way into wholesale prices and we’ll see tomorrow to what extent it matters for consumer prices. Either companies are going to eat rising wholesale prices or they’ll do their best to pass it along. Headline CPI expected up 2.2% with a core rate of 1.8%.
There was a modest reaction in the TIPS market as implied inflation expectations both 5 yrs and 10 yrs out rose 1 bp. The 2 yr note yield is now at 1.84%, a fresh 9 year high and the 10 yr is touching 2.40% again. To repeat, higher cyclical inflation is coming I believe and the current level of global interest rates is wholly unprepared if I’m right.