August 2017 Producer Price Final Demand Year-Over-Year Inflation Significantly Grew

The Producer Price Index year-over-year inflation significantly grew from 1.9 % to 2.4 %.

Analyst Opinion of Producer Prices

The Producer Price Index surprisingly surged year-over-year. I would assume this is a Hurricane Harvey affect. Here is what the BLS said in part:

Three-quarters of the August increase in the final demand goods index can be traced to prices for gasoline, which jumped 9.5 percent. The indexes for jet fuel, industrial chemicals, potatoes, home heating oil, and light motor trucks also moved higher. Conversely, prices for meats fell 3.4 percent. The indexes for fresh vegetables (except potatoes) and for plastic resins and materials also declined.

Over half of the August increase in the index for final demand services can be attributed to prices for consumer loans (partial), which advanced 1.7 percent. The indexes for outpatient care (partial), machinery and equipment wholesaling, truck transportation of freight, and food retailing also moved higher. In contrast, margins for fuels and lubricants retailing fell 6.8 percent. The indexes for chemicals and allied products wholesaling, guestroom rental, and airline passenger services also declined.

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 moderated to 1.9 %.

The market had been expecting (from Bloomberg):

month over month change Consensus Range Consensus Actual PPI-Final Demand (PPI-FD) 0.1 % to 0.4 % +0.3 % +0.2 % PPI-FD less food & energy (core PPI) 0.1 % to 0.3 % +0.2 % +0.1 % PPI-FD less food, energy & trade services 0.2 % to 0.3 % +0.2 % +0.2 %

The producer price inflation breakdown:

category month-over-month change year-over-year change final demand goods +0.5 %   final demand services +0.1 %   total final demand +0.2 % +2.4 % processed goods for intermediate demand +0.4 % +4.1 % unprocessed goods for intermediate demand -0.7 % +6.8 % services for intermediate demand +0.2 % +2.6 %