PPI-FD
Released On 10/15/2014 8:30:00 AM For Sep, 2014
"Inflation at the producer level has basically disappeared and even turned negative. The PPI for total final demand in September slipped 0.1, following no change the month before. Analysts expected a rise of 0.1 percent. Total final demand excluding food & energy was unchanged after easing to 0.1 percent in August. The median market forecast was for 0.1 percent. Total final demand excluding food, energy, and trade services dipped 0.1 percent after rising 0.2 percent in August.
"The index for final demand goods moved down 0.2 percent in September, the second consecutive decrease. The September decline was led by prices for final demand energy, which fell 0.7 percent. The index for final demand foods also decreased 0.7 percent. In contrast, prices for final demand goods less foods and energy advanced 0.2 percent.
"On a seasonally adjusted year-ago basis, PPI final demand was up 1.6 percent in September versus 1.8 percent in August. Excluding food & energy, PPI final demand was up 1.8 percent, versus the August pace of 1.6 percent.
"Inflation numbers are very soft and giving central banks leeway to easy monetary policy."
Recent History Of This Indicator
"The producer price index for final demand in August was unchanged after a 0.1 percent gain in July. Food and energy softened producer prices in August. Total final demand excluding food & energy eased to 0.1 percent in August after rising 0.2 percent the month before. Total final demand excluding food, energy, and trade services increased 0.2 percent in August, matching the July rate. The final demand services index climbed 0.3 percent in August after inching up 0.1 percent in July. Eighty percent of the August advance can be traced to a 0.3-percent rise in prices for final demand services less trade, transportation, and warehousing. The index for final demand transportation and warehousing services also increased 0.3 percent. The index for final demand goods moved down 0.3 percent in August, the largest decrease since a 0.7-percent drop in April 2013. Over 80 percent of the August decline is attributable to prices for final demand energy, which fell 1.5 percent. The index for final demand foods decreased 0.5 percent."
Apologies, Ricter. I didn't see this post when you made it last week. It was only after FHL posted today that I realized additional posts had been made by you and the other economically challenged user, Covertibility.
Month over Month PPI numbers are ok to look at, as long as they follow a trend. If you have a month that slips negative (because of oil price drop), it doesn't really do a lot for producers, as many of them buy several months in advance to hedge. But a trend would be nice.
In regards to the PPI final demand vs. YAG being up 1.6 percent with the big drop in energy, this doesn't really help the consumer because manufacturers and producers are very hesitant to lower prices (as I've explained to you a zillion times or so now) thinking that low prices are transitory and not something that will last. So a rising PPI is far more impacting to consumers (as producers are quick to cover margins with price increases) but month where the index is essentially flat doesn't bring the desired relief.
To give you an example of what I mean, I went back and looked at the CPG industry (food products on grocery shelves only - IRI/Neilsen Syndicated Data) and found that in the last 4 years, there have been 127 main category price changes (by categories, I'm referring to things like Milk or baby food, non brand specific).
Of the 127 changes, only 19 were price decreases. The rest were all moves up. This is despite periods during that 4 years of "stagnant PPI gains".
Perhaps, if we had a whole year of low to negative PPI, producers would actually lower prices (like after 2008 when retailers came to manufacturers and told them they needed to lower prices because the commodity spike was "over"), you might see producers give in. But they've been burned too much in the past, and they know the government is intent on inflation - not deflation.
To sum up, a stagnant monthly PPI report means little or nothing to consumers. It's a tad more relevant to producer margins, but only slightly so. I do wish it were different.
This is one of those topics where I wish I could agree with your cheerleading. But unfortunately the facts in the real world aren't supportive.
