Published: Thu, December 14, 2017
Markets | By Erika Turner

Energy prices drive USA wholesale inflation to 5-year record high

Energy prices drive USA wholesale inflation to 5-year record high

Underlying U.S. consumer inflation slowed in November due to weak health-care costs and the biggest drop in apparel prices south of the border since 1998.

The report is the Federal Reserve's last peek at a major inflation gauge before the central bank's two-day policy meeting concludes Wednesday afternoon.

Surging gasoline prices pulled US consumer inflation up 0.4 percent in November.

The Labor Department said Wednesday that prices at the pump increased a sharp 7.3 percent after falling in October. There are concerns among some policymakers that the factors behind the tame inflation could prove more persistent.

"The pickup over the year will be welcomed by the Fed as an indication that inflation is gradually moving up", said Sarah House, an economist at Wells Fargo Securities.

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The index for final demand goods advanced 1.0% in November, the fourth consecutive increase. Wholesale food prices rose 0.3% after increasing 0.5% in October and prices for services gained 0.2% following a 0.5% gain in October.

The November increase reflected a 4.6 percent increase in energy costs, the biggest since May 15. Excluding the volatile categories of food and energy, so-called core prices rose a more sluggish 0.1%, a slowdown from the previous month's 0.2% increase. In the 12 months through November, the price of doctor visits fell 1.8 per cent, the biggest decline since records started in 1947. Producer prices rose 3.1% for the twelve months ended November 2017, the largest gain since the twelve months ended January 2012.

The Fed made a decision to raise interest rates on Wednesday for the third time this year and expected to hike the rates three more times in 2018.

Steve Reed, economist at the Labor Department, said the department has received lower response rates in the physicians' services category over the last several years.

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