The US Producer Price Index (PPI) climbed to 149.78 in November 2025, marking a 0.42% increase from October’s 149.16 and a 1.45% rise year-over-year. This figure exceeded the consensus estimate of 149.40, signaling persistent upstream inflation pressures. Over the past 12 months, the PPI has averaged 148.50, indicating a steady but moderate inflation trend in producer prices.

Drivers this month

• Energy prices contributed approximately 0.12 percentage points to the monthly increase, reflecting higher crude oil and natural gas costs.
• Core goods excluding food and energy added 0.15 percentage points, driven by durable goods and intermediate materials.
• Services prices rose modestly, contributing 0.10 percentage points, led by transportation and warehousing sectors.

Policy pulse

The PPI remains above the Federal Reserve’s preferred inflation target of 2% annual growth in producer prices, suggesting that upstream inflationary pressures could sustain consumer price inflation. This supports the Fed’s cautious stance on monetary tightening, with potential for further rate hikes if inflation does not moderate.

Market lens

Immediate reaction: US Treasury yields on the 2-year note rose by 5 basis points, reflecting increased expectations of Fed tightening. The US dollar index strengthened by 0.30%, while breakeven inflation rates edged higher by 3 basis points in the first hour after the release.

The PPI is a leading indicator of inflationary trends, capturing price changes from the perspective of producers. Its rise often precedes consumer price inflation (CPI) movements. The November 2025 reading fits into a broader macroeconomic context where core inflation remains sticky despite slowing demand growth.

Monetary Policy & Financial Conditions

The Federal Reserve’s current policy rate stands at 5.25%, reflecting a series of hikes aimed at curbing inflation. The persistent PPI increases reinforce the Fed’s rationale for maintaining restrictive financial conditions. Credit spreads remain stable, but tighter liquidity conditions could amplify cost pressures for businesses.

Fiscal Policy & Government Budget

Fiscal stimulus has waned compared to previous years, with the government budget deficit narrowing to 3.80% of GDP. Reduced fiscal support limits demand-side inflation but does not directly address supply-side cost pressures reflected in the PPI.

External Shocks & Geopolitical Risks

Global supply chain disruptions, particularly in energy and raw materials, continue to influence producer prices. Geopolitical tensions in key commodity-producing regions have elevated risk premiums, contributing to price volatility and upward pressure on the PPI.

Drivers this month

• Energy prices rose 2.10% MoM, the largest contributor to the monthly PPI increase.
• Core goods excluding food and energy increased 0.80% MoM, reflecting supply chain normalization but ongoing cost pressures.
• Services prices increased 0.50% MoM, led by transportation and warehousing.

Market lens

Immediate reaction: The 2-year Treasury yield jumped 5 basis points, reflecting market anticipation of continued Fed rate hikes. The US dollar strengthened modestly, while inflation breakevens rose slightly, indicating market concern over persistent inflation.

Looking ahead, the PPI trajectory suggests continued inflationary pressures in the near term. Supply chain normalization is gradual, and energy price volatility remains a wildcard. The Federal Reserve’s monetary policy will be critical in shaping inflation dynamics and economic growth.

Bullish scenario (20% probability)

• Supply chain improvements accelerate, reducing cost pressures.
• Energy prices stabilize or decline due to geopolitical easing.
• Fed signals a pause in rate hikes, boosting market confidence.

Base scenario (60% probability)

• Producer prices rise moderately, consistent with current trends.
• Fed maintains restrictive policy to contain inflation.
• Fiscal policy remains neutral, with no major stimulus or austerity.

Bearish scenario (20% probability)

• Energy prices spike due to geopolitical shocks.
• Supply chain disruptions worsen, pushing costs higher.
• Fed tightens aggressively, risking economic slowdown.

The November 2025 PPI reading confirms that inflationary pressures at the producer level remain significant. While the pace of increase is moderate, the persistence of core inflation components and energy price volatility complicate the outlook. Policymakers face a delicate balance between containing inflation and supporting growth. Market participants should monitor upcoming data releases closely, as shifts in PPI trends often presage changes in consumer inflation and monetary policy direction.

Insight: PPI vs. SPX since 2020

Since 2020, the PPI and the S&P 500 (SPX) have shown an inverse relationship during inflation spikes. For example, during the 2021 inflation surge, rising PPI readings pressured equity valuations, leading to volatility in SPX. Conversely, periods of PPI stabilization have supported equity rallies. This dynamic underscores the importance of inflation control for sustained market growth.

Key takeaway: The November 2025 PPI reading confirms persistent inflation pressures, supporting a cautious Fed stance and signaling continued market volatility ahead.