July Producer Price Index: Core Final Demand Up 0.1% MoM

Today’s release of the July Producer Price Index (PPI) for Final Demand came in at 0.0% month-over-month seasonally adjusted, down from last month’s 0.3%. It is at 3.3% year-over-year, down from 3.4% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.1% MoM, down from 0.3% the previous month and is up 2.7% YoY NSA. Investing.com MoM consensus forecasts were for 0.2% headline and 0.2% core.

Here is the summary of the news release on Final Demand:

The Producer Price Index for final demand was unchanged in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.3 percent in June and 0.5 percent in May. On an unadjusted basis, the final demand index increased 3.3 percent for the 12 months ended in July.

In July, a 0.1-percent rise in the index for final demand goods offset a 0.1-percent decline in prices for final demand services.

The index for final demand less foods, energy, and trade services moved up 0.3 percent in July, the same as in June. For the 12 months ended in July, prices for final demand less foods, energy, and trade services climbed 2.8 percent. More…

Finished Goods: Headline and Core

The BLS shifted its focus to its new “Final Demand” series in 2014, a shift we support. However, the data for these series are only constructed back to November 2009 for Headline and April 2010 for Core. Since our focus is on longer-term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates.

As this (older) overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

As the next chart shows, the Core Producer Price Index is far more volatile than the Core Consumer Price Index. For example, during the last recession producers were unable to pass cost increases to the consumer.