Producer Prices Fall for Third Straight Month in November

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Charlie Neibergall/AP
By Lucia Mutikani

WASHINGTON -- U.S. producer prices fell for a third straight month in November, pointing to a lack of inflation pressure that could give the Federal Reserve pause as it weighs the future of its monthly bond purchases.

The Labor Department said Friday its seasonally adjusted producer price index slipped 0.1 percent as gasoline prices maintained their downward trend.

Prices received by the nation's farms, factories and refineries had fell 0.2 percent in October.

Economists polled by Reuters had expected wholesale prices would be flat in November.

In the 12 months through November, producer prices increased 0.7 percent after rising 0.3 percent in October.

Wholesale prices excluding volatile food and energy costs nudged up 0.1 percent after rising 0.2 percent the prior month. %VIRTUAL-article-sponsoredlinks%In the 12 months through November, the so-called core PPI rose 1.3 percent after increasing 1.4 percent in October.

U.S. Treasuries prices extended earlier gains after the data suggested inflation may remain below the Fed's target and erode the case for withdrawing stimulus soon.

Despite signs of economic growth strengthening, there is little to indicate that will be accompanied by a pick-up in price pressures because of still-considerable labor market slack.

Persistently low inflation could complicate matters for the U.S. central bank, which is getting ready to start slowing the pace of its $85 billion monthly bond purchases. Some Fed officials have raised concerns about inflation being too low.

A steady flow of fairly strong data, ranging from retail sales to employment, has fanned speculation the Fed could start to ease back on stimulus as early as at its meeting next Tuesday and Wednesday. Most economists, however, expect the Fed to hold off until January or March.

Last month, wholesale gasoline prices fell 0.7 percent, accounting for nearly three-quarters of the decrease in the energy index. Gasoline prices had declined 3.8 percent in October.

Wholesale food prices were flat after rising 0.8 percent in October. Higher prices for pork were offset by a record fall in bakery goods and the biggest drop in the prices for young chickens in nearly three years.

Passenger car prices fell 0.8 percent. They had increased 1.7 percent in October as new vehicle models were introduced. Light truck prices increased 0.6 percent after falling 0.1 percent in October.

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Producer Prices Fall for Third Straight Month in November
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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