Today’s release of the September Producer Price Index (PPI) for Final Demand came in at 0.4% month-over-month seasonally adjusted, up from last month’s 0.2%.

 

By Jill Mislinski

 

It is at 2.6% year-over-year, up from 2.4% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy(NYSEARCA:XLE)) came in at 0.4% MoM, up from 0.1% the previous month and is up 2.2% YoY. Investing.com MoM consensus forecasts were for 0.4% headline and 0.2% core.

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

The Producer Price Index for final demand advanced 0.4 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.2 percent in August and edged down 0.1 percent in July. (See table A.) On an unadjusted basis, the final demand index increased 2.6 percent for the 12 months ended in September, the largest rise since an advance of 2.8 percent for the 12 months ended February 2012.

Within final demand in September, prices for final demand services rose 0.4 percent, and the index for final demand goods climbed 0.7 percent.

Prices for final demand less foods, energy, and trade services increased 0.2 percent in September, the same as in August. For the 12 months ended in September, the index for final demand less foods, energy, and trade services advanced 2.1 percent.

Hurricanes Harvey and Irma had virtually no impact on data collection efforts or survey response rates, and no changes in estimation procedures were necessary. 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 overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

Final Demand vs. Finished Goods
FRED® Graphs ©Federal Reserve Bank of St. Louis. All rights reserved.

Now let’s visualize the numbers with an overlay of the Headline and Core (ex-food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge that began in mid-2014 in headline PPI is, of course, energy related. It is now off its interim low set in April of 2015. Year-over-year Core PPI, now at 1.7%, has trended lower from its 2.3% interim high also set in 2015.Producer Price Index

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.

PPI CPI Core Comparison

Check back next month for a new update.