September Producer Price Index: Core Final Demand Up 0.4% MoM

Yesterday's release of the September Producer Price Index (PPI) for Final Demand was at 0.4% month-over-month seasonally adjusted, up from a 0.3% increase last month. It is at 0.4% year-over-year, up from -0.2% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.4% MoM, unchanged from the previous month, and is up 1.2% YoY NSA. Investing.com MoM consensus forecasts were for 0.2% headline and 0.2% core.

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

he Producer Price Index for final demand advanced 0.4 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.3 percent in August and 0.6 percent in July. (See table A). On an unadjusted basis, the final demand index increased 0.4 percent for the 12 months ended in September, the first advance since moving up 0.3 percent for the 12 months ended in March.

In September, nearly two-thirds of the rise in prices for final demand is attributable to a 0.4-percent increase in the index for final demand services. Prices for final demand goods also moved up 0.4 percent.

he index for final demand less foods, energy, and trade services advanced 0.4 percent in September, the largest increase since rising 0.4 percent in April 2019. For the 12 months ended in September, prices for final demand less foods, energy, and trade services moved up 0.7 percent, the largest advance since increasing 1.0 percent for the 12 months ended in March. 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.