Wholesale Inflation Picks Up Steam: PPI Data Signals Persistent Price Pressures

Markets opened on soft footing this morning, with the Dow slipping 150 points, Nasdaq dropping 140, and the S&P 500 down 28 at the opening bell—a mood that shifted notably once economic releases hit the wires.

The PPI Data Story: Headline vs. the Fine Print

November’s Producer Price Index (PPI data) painted a mixed picture that deserves closer inspection. On the surface, headline PPI looked encouraging with a month-over-month gain of just +0.2%, beating the consensus forecast of +0.3%. But dig deeper and the narrative changes.

The core PPI reading—stripping out food and energy volatility—essentially flatlined month-over-month at 0.0%, compared to October’s revised +0.3%. More telling, however, is the ex-food, energy and trade figure: +0.2% for November, a sharp pullback from October’s hefty upward revision of +0.7%.

Year-over-year, the picture looks decidedly less benign. Headline PPI climbed to +3.0% from +2.8%, marking the first time in months we’ve seen a 3-handle reading. Core PPI similarly ticked up 10 basis points to +3.0%, while the stripped-down ex-food, energy and trade measure surged to +3.5%—the highest level since March of the previous year. This is wholesale inflation that’s not cooling as quickly as hoped.

Consumer Resilience Meets Producer Headwinds

Contrasting sharply with yesterday’s tame Consumer Price Index numbers, today’s wholesale PPI data throws some caution back into the conversation. A +3.5% year-over-year print on producer prices excluding food, energy and trade isn’t something to brush aside, especially as December figures won’t arrive for another couple of weeks.

On the brighter side, November’s retail sales came in stronger than anticipated. Headline retail sales jumped +0.6%, besting the +0.4% estimate and marking a rebound from October’s downward revision of -0.1%. Excluding autos, the figure held solid at +0.5%—more than double October’s revised +0.2%. Even core retail sales, stripping out both autos and gas, remained positive at +0.4%. These pre-holiday shopping numbers suggest American consumers are still willing to open their wallets, with early reports indicating holiday spending performed robustly.

Banking Sector Delivers Mixed Signals

Major financial institutions reported Q4 results this morning, with Citigroup, Bank of America and Wells Fargo all delivering bottom-line beats. Citigroup posted earnings of $1.81 per share, Bank of America came in at 98 cents, and Wells Fargo hit $1.76—all exceeding Wall Street targets.

Yet performance varied beneath the surface. Citigroup benefited from reduced loan loss provisions, while Wells Fargo’s revenue fell short due to unexpected severance charges. Bank of America’s net interest income expanded during the quarter. Despite the positive earnings surprises, share price reactions were muted—Citigroup advanced on the news, but Bank of America and Wells Fargo both declined 2% in morning trading.

What It Means Going Forward

The divergence between moderating consumer inflation and sticky wholesale PPI data suggests inflation remains a story still being written. Markets will be watching closely for December PPI figures and continuing labor market signals to assess whether price pressures truly are cooling or merely pausing.