The Producer Price Index format and breakdown has been reworked this month, and it likely will take some time to make sense of this data.
The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.
- The BLS reported that the Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate fell from 1.2% to 0.9%.
- The market had been expecting finished goods price inflation of 0.1% to 0.4% (consensus 0.2%) month-over-month versus the -0.1% reported.
- It was the decline in prices in the service sector which caused this month’s deflation.
The manufacturing supply chain inflation:
- finished goods annual inflation = from 1.2% to 0.9%
- intermediate goods annual inflation = from 0.9% to 1.2%
- crude goods was eliminated from reporting
| category | month-over-month change | year-over-year change |
| final demand goods | 0.4% | Â |
| final demand services | -0.3% | Â |
| total final demand | -0.1% | 0.9% |
| Â | Â | Â |
| processed goods for intermediate demand | 0.7% | 0.0% |
| processed goods for intermediate demand | 5.7% | 5.4% |
| services for intermediate demand | 0.2% | 1.2% |
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)
The core PPI (excluding food and energy) was up 0.2% month-over-month (the market expect core to grow 0.0% to 0.2% – consensus 0.1%). Removing food and energy 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.
