May 2018 Producer Price Final Demand Year-Over-Year Inflation Grew

The Producer Price Index year-over-year inflation increased from 2.6 % to 3.1 %.

Analyst Opinion of Producer Prices

The Producer Price Index rose year-over-year. Food prices did moderate. Here is what the BLS said in part:

In May, 60 percent of the rise in the index for final demand is attributable to a 1.0-percent advance in prices for final demand goods. The index for final demand services moved up 0.3 percent. Prices for final demand less foods, energy, and trade services edged up 0.1 percent in May, the same as in April. For the 12 months ended in May, the index for final demand less foods, energy, and trade services climbed 2.6 percent.

The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.

The market had been expecting (from Bloomberg):

month over month change Consensus Range Consensus Actual
PPI-Final Demand (PPI-FD) 0.1 % to 0.5 % +0.3 % +0.5 %
PPI-FD less food & energy (core PPI) 0.1 % to 0.3 % +0.2 % +0.3 %
PPI-FD less food, energy & trade services 0.2 % to 0.3 % +0.2 % +0.1 %

The producer price inflation breakdown:

category month-over-month change year-over-year change
final demand goods +0.1 %  
final demand services +0.3 %  
total final demand +0.5 % +3.1 %
processed goods for intermediate demand +1.5 % +6.3 %
unprocessed goods for intermediate demand +2.5 % +6.8 %
services for intermediate demand +0.3 % +3.3 %

(Click on image to enlarge)

 

z ppi1.png

In the following graph, one can see the relationship between the year-over-year change in intermediate goods index and finished goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower.

Percent Change Year-over-Year - Comparing PPI Finished Goods (blue line) to PPI Intermediate Goods (red line)

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