The first small sign of some inflation pressures were contained in last weeks data. The Producer Price Index was up 0.4% for the month of October. This takes the year-over-year increase up to 2.8%, from 2.6% though September. The monthly data was driven by the services sector. Trade services jumped 1.1% for the month and this followed a strong 0.8% for September. This sector gain was primarily due to higher prices for legal and health care services. The core rate, excluding food and energy, was also up 0.4% taking the YOY gain up to 2.4% from 2.2%. The Consumer Price Index did not reflect upward pressure. The monthly gain was only 0.1% and the core rate was 0.2%. This brings the core rate up to a 1.8% year-over-year increase, which is still below the Fed’s target of 2.0%. The risk is the rise in wholesale prices will begin to work into final consumer prices.

The industrial production report was also strong, led by a large jump in manufacturing. We have been expecting this improvement based on the strong ISM Index and strong durable goods orders in the past three months…

ProBank Austin Advisor – November 20, 2017