Courtesy of Doug Short.
Today’s release of the May Producer Price Index (PPI) for Final Demand fell 0.2% month-over-month seasonally adjusted. Core Final Demand declined 0.1% from last month. Both indicators were below the Investing.com expectation of parallel 0.1% increases.
The unadjusted year-over-year change in Final Demand is up 2.0%, little changed from last month’s YoY of 2.1%.
Here is the essence of the news release on Finished Goods:
The Producer Price Index for final demand fell 0.2 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decline followed increases of 0.6 percent in April and 0.5 percent in March. On an unadjusted basis, the index for final demand advanced 2.0 percent for the 12 months ended in May….
In May, the 0.2-percent decrease in final demand prices can be traced to the indexes for final demand services and final demand goods, both of which also declined 0.2 percent. More…
Finished Goods: Headline and Core
The BLS shifted its focus to its new “Final Demand” series earlier this year. I fully support this shift. However, the data for these series are only constructed back to November 2009 for Headline and April 2010 for Core. Since my focus is on longer term trends, I continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates.
The May Headline Finished Goods declined 0.05% MoM and is up 2.45% YoY, down slightly from last month’s 3.08%, which was the largest YoY jump in 26 months. Core Finished Goods rose 0.05% MoM and is up 1.78% YoY.
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. As we can see, the YoY trend in Core PPI (the blue line) declined significantly during 2009 and stabilized in 2010, increased in 2011 and then eased during 2012 and most of 2013. Despite the winter surge in the core indicator, it remains below the common 2% benchmark.
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. Likewise in 2010 the Core PPI generally rose while Core CPI generally fell. Since 2012, Core PPI steadily trended downward but has bounced in recent months. Since January of 2013, Core PPI has been below 2%, but it is well off its interim 1.15% low in August of last year.
Check back next month for a new update.
