U.S. producer prices rise strongly, point to firming inflation

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But the tight job market has yet to generate significant wage growth, which would push inflation higher.

Fed policymakers have been confessed to being baffled throughout much of 2017 by persistently weak inflation, especially in the face of falling unemployment, but even so are expected to raise rates at this week's meeting to keep ahead of expected price gains in 2018.

The big picture: Inflation has been surprisingly weak this year despite an ultra-tight labor market and stronger US economy, but some inflationary pressures have reemerged, especially in energy.

The Labour Department said its producer price index for final demand increased 0.4 per cent last month, advancing by the same margin for three straight months. That was the biggest gain since January 2012 and followed a 2.8 per cent rise in October.

Figures released Wednesday by the U.S. Labor Department revealed that its Consumer Price Index excluding the volatile food and energy components ticked up 0.1% also as prices for airline fares and household furnishing fell. The so-called core PPI had increased by 0.2 per cent for two straight months.

The yearly rate of core inflation climbed to 2.4%, the highest mark at least since mid-2014.

"The lack of a sustained pickup in core CPI does make the Fed deliberations about the pace of monetary policy tightening next year more complicated", said Kathy Bostjancic, head of US macro investor services at Oxford Economics in NY.

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Producer price inflation has continued to strengthen since hitting a recent low of a 1.9% year-over-year increase in June.

The government will report on consumer prices Wednesday and economists are looking for a 0.4 percent November increase due to rising energy prices at the retail and wholesale levels.

The November increase reflected a 4.6 percent increase in energy costs, the biggest since May 15.

The index for final demand goods advanced 1.0% in November, the fourth consecutive increase.

November saw price gains in areas including food, light motor trucks and airfares. Prices for services gained 0.2 per cent last month after increasing 0.5 percent in October.

Prices at the wholesale level rose 0.4 percent in November and 3.1 percent over the past year.

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