- Chris Rupkey, chief financial economist at MUFG Union Bank
US producer prices surprisingly inched higher in October, though underlying trend pointed to a subdued inflation that could foster the Fed to keep interest rates at ultra-low level a bit longer. According to the Labor Department, the producer price index rose 0.2%, led by an increase in prices for services, following the 0.1% drop a month earlier. The core PPI, which strips out food, energy and trade services, climbed a modest 0.1% after falling 0.1% in the preceding month. On an annual basis, PPI declined to 1.5%, from 1.6% growth in the previous period, while analysts had expected a 1.3% expansion. Core PPI annually increased to 1.8%, compared with 1.6% in the prior-year period.
A separate report showed American homebuilder sentiment rose in November, recovering from the sharpest decline since February in the previous month as market conditions looked much better. The NAHB/Wells Fargo Housing Market index rose to 58 in the reported month up from 54 in October, with the gauge hovering above 50 for a fifth consecutive months. So far this year, the reading is running at an average 52 points, a notch higher than last year. Although housing remains one of the weak spots of the nation's economy, economists expect the market to strengthen over the next few quarters. The main catalysts behind the anticipated pick-up should be rising employment, historically low mortgage rates as well as easing credit standards.
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