The combined producer and import price index surprisingly fell in November. A sizeable 0.9 percent monthly drop easily more than reversed October's 0.2 percent gain and reduced the annual inflation rate from minus 0.9 percent to minus 1.3 percent, its weakest reading since January 2021.

Domestic producer prices were down 0.7 percent versus October, trimming their 12-month rate from 0.8 percent to 0.6 percent. Import prices declined a steeper 1.3 percent, lowering their annual rate from minus 4.1 percent to minus 4.8 percent.

Within the PPI, a 2.2 percent slump in chemical and pharmaceutical products alone subtracted 0.6 percentage points from the overall monthly change. Petroleum products (minus 2.2 percent) and electricity and gas (minus 0.8 percent) also fell sharply and there were no increases of any size. Import prices were depressed by mining and quarrying products (minus 13.7 percent) and petroleum products (minus 4.5 percent). Consequently, the underlying composite index decreased 0.6 percent on the month to stand 0.2 percent lower on the year, its weakest outturn since March 2021.

Today's report puts the Swiss RPI at 4, indicating that economic activity in general is essentially moving in line with market expectations. However, excluding the surprising weakness of prices, at 35 the RPI-P shows the real economy running a good deal hotter. For the SNB, this combination should ensure another vote for no change in policy later this morning.

Prices are seen edging 0.1 percent higher on the month after a 0.2 percent increase in October.

The producer price and import price index focuses on the actual prices of products on the market (transaction price) at the time of the order. The prices of domestic products are taken at the producer or factory level, excluding value added tax and consumption taxes. For imports, prices are collected at the Swiss border, without the value added tax, taxes on consumption and tariffs. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer

The producer price and import price index measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. Producer and import prices are more volatile than consumer prices. While the CPI is the price index with the most impact in setting interest rates, the producer price and import price index provides significant information earlier in the production process. The producer price and import price index is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace. The bond market rallies when the producer price and import price index decreases or posts only small increases, but bond prices fall when the index posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.