US Producer Prices Are Muted as Energy Costs Drop

• US. producer prices remained unchanged in November, defying expectations of a 0.1% increase. This was attributed to cheaper energy goods, with services prices also holding flat for a second consecutive month.
• The report from the Labour Department has boosted optimism that overall inflation will continue to subside. This is seen as a positive development, potentially allowing the Federal Reserve to consider interest rate cuts in the coming year. The Federal Reserve signalled a shift in its economic projections, indicating the end of a historic tightening of monetary policy.
• Goods prices were stable, with a decline in energy product costs offset by a rebound in food prices. Notably, avian flu-related issues impacted egg prices. Energy costs were pulled down by lower gasoline prices. Excluding food and energy, core goods prices rose modestly, raising concerns about potential goods deflation.
• The cost of services, a key driver of inflation, was unchanged, with lower transportation and warehousing costs. However, wholesale prices for hotel and motel rooms rose.
• Despite ongoing inflation above the Fed's 2% target, markets are anticipating a potential rate cut in May. Analysts suggest that while consumer spending continues to fuel inflation, a downward trend in service providers' costs may stabilize inflation if consumer demand cools.

(Source: Reuters)