Wholesale inflation fell by 2.2% in November, the US Bureau of Labor Statistics reported today, completing a fourth straight monthly decline. The consensus estimate had been for a 2.0 percent drop following on from October’s record drop of 2.8%.

PPI MoM for the last 12 reporting periods

Leading the declines in November were energy prices. After a 12.8% drop in October, energy was down 11.2% for the month of November. Liquefied petroleum gas and home heating oil accelerated declines in November, down 25.7 and 23.3 percent respectively after 24.9 and 9.6% declines one month earlier. Declines slowed in residential natural gas and unleaded premium and mid-premium gasoline.

Prices for consumer foods came in unchanged after a fall of 0.2% in October. Within the index, eggs posted the sharpest monthly fall, down 18.2% with milled rice and pork both down 5.3%. Fresh fruit and vegetables were up by 2.1 and 3.8 percent respectively.

The Producer Price Index shows that wholesale prices are 0.4% higher than they were at the same time last year. However, this has fallen sharply from the peak of 9.9% in July and 5.2% just one month ago. Indeed, the current yearly figure is the lowest seen since January of 2007 and is further evidence that price pressures are falling away sharply in the US.

Elsewhere the Core PPI was up 0.1% MoM and inline with economists’ expectations. Traders had been expecting a moderation following the 0.4% seen in October. On a yearly basis the core number, which strips out the volatile food and energy components, is up by 4.2%.

Aside from the headline number for finished goods the index for intermediate goods fell by a record 4.3% while crude goods were down by 12.5%. Last month Intermediate goods dropped by 3.9% while crude goods fell by 18.6%.

US PPI fell by a record 2.8% in October the Labor Department reported today. Gasoline prices and the first drop in food prices in 8 months contributed heavily to the number.

The 2.8% fall in the Producer Price Index for finished goods was led by a 12.8% drop in Energy prices. This is much worse than the -2.9 and -4.6% seen in the previous 2 months. Foods were also down, by 0.2% on the month. This represents the first decline since February of this year.

On closer inspection we can see that gasoline prices crumbled by 24.9% in October after just a 0.5% decrease a month earlier. Leading the finished consumer foods lower was meat, down by 5.6% versus a 0.6% fall one month previous.

Today’s number leaves the Producer Price Index for the 12 months ended in October at 5.2%, down from last month’s 8.7%. The YoY number peaked at 9.8% in July this year.

US PPI MoM for the last 12 reporting periods

Despite the rapid decline in overall prices for finished goods, the Core number (excluding foods and energy) recorded a 0.4% MoM increase. This is inline with Septembers 0.4% increase, but only half of July’s 0.8% number.

Today’s news has done little to change trader’s view of a large interest rate cut from the Fed in December. It would seem that the markets are far more focused on the negative economic outlook than inflation data.

Currently, interest rate futures are fully pricing in a 0.50% cut in the Federal Funds Rate to 0.50% at the next meeting with a minimal chance of a 0.75% cut.