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Wholesale prices rose 0.2% in October, less than expected, as inflation eases
Title of the article

https://www.cnbc.com/2022/11/15/wholesale-prices-rose-0point2percent-in-
october-less-than-expected-as-inflation-eases.html

Source of the article

15th November 2022

Date the article was published

16th November 2022

Date the commentary was written

Word count (750 words maximum)

 Section 1: Microeconomics

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relates to (please tick the one that
 Section 2: Macroeconomics


is most relevant)
Section 3: International economics

 Section 4: Development economics

 ARTICLE
ECONO MY

Wholesale prices rose

0.2% in October, less than
expected, as inflation
eases
PUBLI S HE D T UE , NO V 15 20228:31 AM E S T UPDATED TUE, NOV 15 20223:29 PM EST

Jeff Cox @ J E F F . C O X . 7 5 2 8 @ J E F F C O X C N B C C O M
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KEY POINTS
 The producer price index rose 0.2% in October, below the 0.4% estimate.

 A significant contributor to the slowdown in wholesale inflation was a 0.1% decline in services,
the first outright decline in that measure since November 2020.

 On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September.

 In other economic news, the Empire State Manufacturing Survey for November registered a
reading of 4.5%, much better than the estimate for a -6% reading.

Wholesale prices increased less than expected in October, adding to hopes that
inflation is on the wane, the Bureau of Labor Statistics reported Tuesday.

The produce price index, a measure of the prices that companies get for finished goods
in the marketplace, rose 0.2% for the month, against the Dow Jones estimates for a
0.4% increase.

Stock futures tied to the Dow Jones Industrial Average were up more than 400 points
shortly after the release, reflecting market anticipation that cost of living increases not
seen since the early 1980s were easing if not receding. However, market gains tapered
through the day, with the Dow up just over 100 points late in the session.

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%.

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.
“The PPI read certainly adds more fuel to the fire for those who feel we may finally be
on a downward inflation trend,” said Mike Loewengart, head of model portfolio
construction at Morgan Stanley’s Global Investment Office.

One significant contributor to the slowdown in inflation was a 0.1% decline in the
services component of the index. That marked the first outright decline in that measure
since November 2020. Final demand prices for goods rose 0.6%, the biggest gain since
June an traceable primarily to the rebound in energy, which saw a 5.7% jump in
gasoline.

The deceleration came despite a 2.7% increase in energy costs and a 0.5% increase in
food.

Inflation has soared during the pandemic era as supply chains could not keep with
overheated demand for long-lasting big-ticket items, particularly those dependent on
semiconductors. Economists generally expect that inflation has at least plateaued,
though there are plenty of risks on the horizon, including a potential rail strike that could
apply new pressure to supply chains.

The producer index is generally considered a good leading indicator for inflation as it
gauges pipeline prices that eventually work their way into the marketplace. PPI differs
from the more widely followed consumer price index as the former measures the prices
that producers receive at the wholesale level while CPI reflects what consumers actually
pay.

Hopes that inflation is at least slowing spiked last week when the CPI showed a monthly
gain of 0.4%, lower than the 0.6% estimate. The 7.7% annual gain was a deceleration
from a 41-year peak of 9% in June. Markets also soared following Thursday’s CPI
release.

Federal Reserve officials have been raising interest rates in hopes of bringing down
inflation. The central bank has hiked its benchmark borrowing rate six times year for a
total of 3.75 percentage points, its highest level in 14 years.

Markets on Tuesday afternoon were pricing in about an 80% chance that the Fed would
downshift in rate hikes in December, with a 0.5 percentage point increase after four
straight 0.75 percentage point moves.

Vice Chair Lael Brainard said Monday she expects the pace of hikes soon will slow,
through rates are likely to still go higher. She said the Fed can move to a more
“deliberate” posture as it watches the impact of its rate hikes.

In other economic news Tuesday, the New York Fed’s Empire State Manufacturing
Survey for November registered a reading of 4.5%, an increase of 14 percentage points
on a monthly basis and much better than the estimate for a -6% reading. The index
measures the difference between companies reporting expansion vs. contraction.

However, both the prices paid and received components saw increases, rising 1.9
points and 4.3 points respectively.
 COMMENTARY
This article was published by CNBC, CNBC is one of most recognized leaders in business news
which provides real-time coverage on the financial market coverage and business content. The
author of this article is Jeff Cox. The author is the economics editor for CNBC.com where he covers
the latest data on the financial markets and on the Federal Reserve. This article looks at the
economic well-being of America, looking at the rate of inflation and increase in prices of wholesale
goods. Economic well-being is one of the key concepts of the economic course, it refers to levels of
prosperity, economic satisfaction and stands of living among the members of a society. The article
also talks about the PPI (Producer Price Index) which measures the average change over time in
the prices domestic producers receive for their output, the article states how the PPI raised 0.2% in
October compared to the predicted 0.4%. The author also writes about increase in prices of
necessity goods such as food and energy.

Figure 1 – AD/AS Graph of USA

In Figure 1 the graph is as AD/AS graph (aggregate demand and aggregate supply). Aggregate
demand is the total quantity of goods and services that all buyers in an economy (consumers,
firms, the government and foreigners) want to buy over a particular time period, at different
possible price levels. Aggregate supply is the total quantity of goods and services produced in an
economy over a particular time period, at different price levels. AD 1 shift leftwards AD2 as since
deflation which means a continuing decrease in the general price levels occurs. Deflation causes
higher interest rates, unemployment and production slowdown all these effects cause the demand
to decrease as higher interest rates causes debts and loans being more difficult to pay off which
cause businesses and consumers to decrease their spending to cope with paying higher debts.
Unemployment is the number of unemployed people, which is define as all people above the
working the age who are not working and who are actively looking for a job, unemployment cause a
leftward shift of the aggregate demand curve as due to less people having money to purchase
goods or services. Production slowdown also a leftward shift of the aggregate demand as since the
supply of goods is decreased there will be less people will be spending less money which causes a
decrease in GDP.