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U.S. producer prices surge sequentially in October

Producer prices in the U.S. surged in October on volatile components. On a sequential basis, producer prices recovered solidly to 0.6 percent, as compared with consensus expectations of a rise of 0.2 percent. Most of the acceleration seems to be coming from volatile components such as food, energy and trade margins. Core PPI, which excludes these components, rose 0.2 percent sequentially. Food prices were up 1 percent, the first rise in five months, and energy rose 2.7 percent.

On the service front, the highly volatile trade component, which captures margins of companies, rose solidly by 1.6 percent and drove services inflation strength. Warehouse and transportation was a distant second at 0.6 percent.

Personal consumption PPI rose 0.8 percent sequentially and 2.7 percent year-on-year in October, a pretty healthy rise, which was also driven by volatile components. Personal consumption excluding food, energy and trade services rose 0.2 percent sequentially.

“Although the overall measure reported a strong increase, we view the core PPI personal consumption as broadly consistent with our forecast for core CPI at 0.2 percent m/m. More broadly for next week’s October CPI report - we forecast a 0.3 percent m/m (2.5 percent y/y) increase in headline CPI prices and a 0.2 percent m/m (2.2 percent y/y) increase in core CPI prices”, stated Barclays in a research report.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bullish at 87.6281. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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