The Producer Price Index year-over-year inflation grew from 2.6 % to 2.8 %.

Analyst Opinion of Producer Prices

The Producer Price Index again surged year-over-year. Here is what the BLS said in part:

Nearly half of the increase in prices for final demand services can be attributed to margins for fuels and lubricants retailing, which surged 24.9 percent. The indexes for machinery and equipment wholesaling; transportation of passengers (partial); apparel, jewelry, footwear, and accessories retailing; chemicals and allied products wholesaling; and portfolio management also advanced. In contrast, margins for food retailing moved down 2.1 percent. The indexes for food and alcohol wholesaling and for loan services (partial) also decreased.

Almost half of the rise in the final demand goods index was the result of higher prices for pharmaceutical preparations, which increased 2.1 percent. The indexes for industrial chemicals, fresh and dry vegetables, diesel fuel, beef and veal, and tobacco products also advanced. Conversely, prices for gasoline fell 4.6 percent. The indexes for light motor trucks and pork also moved lower. (In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October.

This much gain in the Producer Price Index was not expected – and unless you are the twisted follower of the Fed – this increase is not good economically.

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

The market had been expecting (from Bloomberg):

month over month change Consensus Range Consensus Actual PPI-Final Demand (PPI-FD) 0.0 % to 0.3 % +0.1 % +0.4 % PPI-FD less food & energy (core PPI) 0.1 % to 0.3 % +0.2 % +0.4 % PPI-FD less food, energy & trade services 0.2 % to 0.3 % +0.2 % +0.2 %

The producer price inflation breakdown:

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