- Prior was 5.4%
- PPI final demand m/m vs +0.5% expected
- Prior m/m +0.4%
- Ex-food and energy y/y vs+4.4% expected
- Prior ex-food and energy 4.6% y/y
- Ex-food and energy m/m vs +0.3% expected
- Prior ex-food and energy +0.2% m/m
- Ex-food, energy and trade y/y vs +4.7% prior
- Ex-food, energy and trade m/m vs +0.3% prior
The Producer Price Index (PPI), published monthly by the US Bureau of Labor Statistics, measures the average change in the selling prices that domestic producers receive for their output. Where the CPI tracks inflation from the consumer’s side of the register, the PPI looks at it from the seller’s side, capturing prices at the wholesale and business level before they reach households.
The headline figure is the final demand index, which BLS adopted in 2014 to replace the older finished goods measure. It covers goods, services and construction sold for personal consumption, capital investment, government and export. Services make up roughly two-thirds of the index, so it’s far more than a gauge of factory-gate prices.
Because food and energy prices swing sharply month to month, markets focus on core measures. One strips out food and energy. The narrower ex-food, energy and trade measure also removes trade services. Trade services track changes in retailer and wholesaler margins, which can be volatile and don’t always reflect underlying cost pressure.
The PPI has traditionally been watched as a pipeline indicator, on the theory that higher producer costs eventually pass through to consumers. Today its biggest market impact comes from its role in forecasting the Fed’s preferred inflation gauge, the core PCE price index. Several PPI components feed directly into PCE, including portfolio management fees, airfares and physician and hospital services. Economists combine the CPI and PPI releases to estimate core PCE before it’s published, so a PPI surprise in those categories can shift Fed pricing even when the headline looks benign.
This article was written by Adam Button at investinglive.com.