The Producer Price Index inflation continued to be slight. In all events, the intermediate processing continues to show a moderation of inflation in the supply chain.

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 fell from 1.5% to 1.4%. For the year, the variation in the year-over-year PPI growth has been moderate with inflation usually under 2%.

The market had been expecting:

  Consensus Range Consensus Actual  PPI-FD – M/M change -0.4 % to 0.1 %  -0.1% -0.2%   PPI-FD less food & energy – M/M change (core PPI) 0.0 % to 0.2 %  +0.1% -0.1% 

The producer price inflation breakdown:

category month-over-month change year-over-year change final demand goods -0.7%   final demand services +0.1%   total final demand -0.2% +1.4%       processed goods for intermediate demand -1.0% -0.3% unprocessed goods for intermediate demand -1.3% -1.6% services for intermediate demand +0.3% +1.5%

 

In the following graph, one can see the relationship between the year-over-year change in crude good index and the finish 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 Crude Materials (red line)

Percent Change Month-over-Month- Comparing PPI Finished Goods (blue line) to PPI Crude Materials (red line)

Removing food and energy (core PPI) was originally done to remove the noise from the index, however the usefulness in the twenty-first century is questionable except in certain specific circumstance.