Courtesy of Mish.
Economists were shocked once again today. First, Retail Sales “Solidly” Flat, which we just covered.
The Producer Price Index for Final Demand (PPI-FD) was the real shocker.
Instead of rising 0.1% as expected by the Bloomberg Econoday consensus, it fell 0.4%.
Highlights
The burst higher for producer prices proved brief. The PPI-FD for July fell 0.4 percent to pull the year-on-year rate into the negative column at minus 0.2 percent. When excluding food & energy, prices fell 0.3 percent with the year-on-year rate sinking below 1 percent to only 0.7 percent.
Minus signs fill the July tables with a 0.3 percent decline for services a special concern. The decline, in part reflecting weakness in apparel, ends three months of prior gains and hints at easing demand at the base of the economy. And goods are also down, 0.4 percent lower for the first decline since February. Wholesale prices of food, pulled down by lower corn prices, fell in the month as did prices for energy and construction as well as both cars and light trucks. Rounding out the bad news is a 0.5 percent monthly decline in finished goods prices.
This report will lower estimates for Tuesday’s consumer prices, a report that never has shown much effect from the three or so brief months of price pressure at the wholesale level. This report will not fire up the hawks and, like the weak retail sales report also released this morning, does not point to a September FOMC rate hike.
Recent History
Producer prices have shown unexpected strength the last two reports driven mostly by energy but also by services. Forecasters see the July’s headline, held down by energy, rising only 0.1 percent but at a more constructive 0.2 percent when excluding food & energy. Continued strength in this report would point to eventual pass through to consumer prices where pressures have so far been hard to find.
PPI Final Demand
PPI Details
For additional details, let’s investigate the BLS Producer Price Index Report.
The Producer Price Index for final demand decreased 0.4 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. In July, the decline in the final demand index was led by prices for final demand services, which fell 0.3 percent. The index for final demand goods decreased 0.4 percent.
