The Producer Price Index (PPI) for November is available, and it includes new inflation data that could influence the Federal Reserve at its next meeting on December 17-18. Final demand increasing 3% over the last 12 months is the biggest data point in this report. That’s the largest increase since the 4.7% reported in February 2023. This was fueled by a 0.7% increase in final demand for goods while final demand for services rose by 0.2%.
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Breaking that data down, 80% of the increase in final demand goods is attributable to final demand foods experiencing a 3.1% increase. A large portion of this increase is tied to the 54.6% index increase for chicken eggs.
Moving on to final demand services, final demand trade services led the increase with a 0.8% rise. One-third of this jump is connected to machinery and vehicle wholesaling climbing 1.8% in November.
How This Affects the Next Federal Reserve Meeting
With this PPI report, alongside yesterday’s Consumer Price Index (CPI) report, the chance of an interest rate cut at the next Fed meeting is incredibly high, with a 25-point basis drop expected. This is welcome news for investors in growth stocks, which have been hit by the central bank’s increased interest rates.
However, 2025 isn’t looking nearly as nice as some believe. Markets are expecting the Fed to introduce three interest rate cuts next year, but that might be too optimistic. The latest inflation data shows that prices are stalling, meaning inflation isn’t as decreasing as much as the Fed would like. This could affect plans for interest rate cuts next year.
What Does This Mean for the Stock Market?
While investors have celebrated the latest inflation data alongside expected interest rate cuts, that hype could die down next year. This could lead to a softer 2025 for tech stocks, many of which are strongly affected by interest rates. A few examples worth watching are Meta Platforms (META), Apple (AAPL), Nvidia (NVDA), Alphabet (GOOGL), and Advanced Micro Devices (AMD).
