December 2019 Producer Price Final Demand Year-Over-Year Growth Grows To 1,3%

The Producer Price Index (PPI) year-over-year inflation grew from 1.1 % to 1.3 %,

Analyst Opinion of Producer Prices

Year-over-year Inflation pressures declined this month.

Here is what the BLS said in part:

The Producer Price Index for final demand was unchanged in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices increased 0.4 percent in October and fell 0.3 percent in September. On an unadjusted basis, the final demand index advanced 1.1 percent for the 12 months ended in November. In November, a 0.3-percent rise in prices for final demand goods offset a 0.3-percent decrease in the index for final demand services. The index for final demand less foods, energy, and trade services was unchanged in November after inching up 0.1 percent in October. For the 12 months ended in November, prices for final demand less foods, energy, and trade services moved up 1.3 percent, the smallest advance since climbing 1.3 percent in the 12 months ended September 2016.

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

The market had been expecting (from Econoday):

(Click on image to enlarge)

The producer price inflation breakdown:

(Click on image to enlarge)

(Click on image to enlarge)

In the following graph, one can see the relationship between the year-over-year change in the 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)

Econintersechas shown how pricing change moves from the PPI to the Consumer Price Index (CPI).

Comparing Year-over-Year Change Between the PPI Finished Goods Index (blue line) and the CPI-U (red line)

(Click on image to enlarge)

The price moderation of the PPI began in September 2011 when the year-over-year inflation was 7.0%.

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