The Producer Price Index year-over-year inflation marginally gained from 2.2 % to 2.3 %. However, the month-over-month movements showed inflation moderated?

Analyst Opinion of Producer Prices

Mostly the data shows Producer Price data was treading water. In general, it is goods that remains on an inflation surge trend whilst services inflation has been generally unchanged over the last year. This month’s inflation data is better than expectations.

The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.

  • The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate jumped to 2.2 %,.
  • The market had been expecting (from Bloomberg):
    • month over month change Consensus Range Consensus Actual PPI-Final Demand (PPI-FD) -0.2 % to 0.1 % +0.0 % -0.1 % PPI-FD less food & energy (core PPI) 0.1 % to 0.4 % +0.2 % +0.0 % PPI-FD less food, energy & trade services 0.2 % to 0.3 % +0.2 % +0.1 %

    The producer price inflation breakdown:

    category month-over-month change year-over-year change final demand goods -0.1 %   final demand services -0.1 %   total final demand -0.1 % +2.3 % processed goods for intermediate demand +0.1 % +5.3 % unprocessed goods for intermediate demand -4.2 % +12.7 % services for intermediate demand -0.2 % +1.7 %

     

    z ppi1.png

    In the following graph, one can see the relationship between the year-over-year change in intermediate goods index and finished goods index. When the crude goods growth falls under finish goods – it usually drags finished goods lower.

    Percent Change Year-over-Year – Comparing PPI Finished Goods (blue line) to PPI Intermediate Goods (red line)

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