US producer prices rose faster than expected in November, while a gauge of manufacturing in the New York state unexpectedly fell this month, creating a potential headache for the Federal Reserve.
The Labor Department said today that the seasonally adjusted index for prices paid at the farm and factory gate jumped 1.8%, the largest gain in three months, after a 0.3% rise in October.
Prices were pushed higher by strong energy and light truck vehicle costs. Analysts had expected producer prices to increase by 0.8% last month.
Separate Federal Reserve figures show that US industrial production rose strongly in November, regaining momentum after a flat month. The report showed that output at US factories, mines and utilities was lifted by a 1.1% surge in manufacturing, led by gains in car, appliances, home furnishings as well as consumer goods.
Mining output jumped 2.1% while utility output fell 1.8% due to mild weather that reduced demand for heating. Even with the latest rise, however, industrial production is down 5.1% from a year ago, reflecting the deep recession.
Markets await Fed meeting
Meanwhile, a separate report showed a barometer of manufacturing in New York State unexpectedly plummeted in December, indicating a slowdown in factory activity, while prices paid by manufacturers rose.
The data came as the Federal Reserve prepared to start a regular two-day meeting to deliberate on monetary policy. The US central bank is expected to leave interest rates steady near zero, but analysts will been keen to see if it maintains its pledge to keep borrowing costs ultra low for an 'extended period'.
Analysts said the surprise rise in PPI and signs of price pressures within the New York factory survey could spark speculation the Fed might move more quickly to raise rates than the market has been expecting.
Compared with the same time last year, producer prices surged 2.4% in November, posting their first gain in a year and the largest rise since October 2008.
Markets had expected producer prices to increase 1.6% compared to a year ago.
The New York Federal Reserve said its Empire State general business conditions index fell to 2.55 in December from 23.51 in November.
This was the biggest monthly decline on record and the lowest reading since July 2009 when it was at -0.55. Economists had expected a December figure of 24. Despite December's sharp fall, the index is still well above a record low reached in March.
