April Producer Price Index: Core Final Demand Down 0.3% MoM

Today's release of the April Producer Price Index (PPI) for Final Demand was at -1.3% month-over-month seasonally adjusted, down from a 0.2% decrease last month. It is at 1.2% year-over-year, down from 0.7% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at -0.3% MoM, down from 0.2% the previous month and is up 0.6% YoY NSA. Investing.com MoM consensus forecasts were for -0.5% headline and 0.0% core.

Here is the summary of the news release on Final Demand:

The Producer Price Index for final demand declined 1.3 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decrease is the largest since the index began inDecember 2009. Final demand prices fell 0.2 percent in March and 0.6 percent in February. (See table A.) On an unadjusted basis, the final demand index moved down 1.2 percent for the 12 monthsended in April, the largest decline since falling 1.3 percent for the 12 months ended November 2015.

In April, over 80 percent of the decrease in the final demand index can be traced to a 3.3-percent drop in prices for final demand goods. The index for final demand services moved down 0.2 percent.

Prices for final demand less foods, energy, and trade services fell 0.9 percent in April, the largest decline since the index was introduced in September 2013. For the 12 months ended in April, the index or final demand less foods, energy, and trade services moved down 0.3 percent, the first 12-month decrease.

 

Coronavirus (COVID-19) Pandemic Impact on April 2020 Producer Price Index Survey Data
The Producer Price Index (PPI) response rates for April were consistent with those of March and February, and no changes in estimation procedures were necessary. Additional information is available at www.bls.gov/bls/effects-of-covid-19-pandemic-on-bls-price-indexes.htm#PPI. 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 (older) overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

FRED® Graphs ©Federal Reserve Bank of St. Louis. All rights reserved.

 

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.