Courtesy of Doug Short’s Advisor Perspectives.
Today’s release of the April Producer Price Index (PPI) for Final Demand came in at 0.2% month-over-month seasonally adjusted, unchanged from a revised from 0.2% in March. It is at -1.9% year-over-year, up from -2.0% in March. Core Final Demand (less food and energy) came in at 0.2% MoM, up from 0.1% the previous month and is up 1.6% YoY. The Investing.com forecasts were for 0.3% headline and 0.1% core.
Here is the summary of the news release on Final Demand:
The Producer Price Index for final demand rose 0.2 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices declined 0.1 percent in March and 0.2 percent in February. On an unadjusted basis, the final demand index was unchanged for the 12 months ended in April. (See table A.)
In April, prices for final demand services edged up 0.1 percent, and the index for final demand goods advanced 0.2 percent.
The index for final demand less foods, energy, and trade services moved up 0.3 percent in April following no change in March. For the 12 months ended in April, prices for final demand less foods, energy, and trade services rose 0.9 percent. 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.
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 since mid-2014 in headline PPI is, of course, energy related — now off its interim low set in April of last year. Year-over-year Core PPI, now at 1.6%, has trended lower from its 2.3% interim high set the middle of last year.
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.
Check back next month for a new update.
