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• Consumers beware - new PPI data suggests seller inflation is rising in the US.
• Latest statistics from the U.S. Bureau of Labor Statistics show double the PPI for February as for January.
• These risen prices are likely to be passed on to consumers in future months.

Yesterday, the U.S. Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand rose 0.6 percent in the United States during February, seasonally adjusted.

This means that, for the United States, PPI has effectively doubled in one month, after rising 0.3% in January and actually decreasing 0.1% in December 2023.

What is PPI?

As the US Bureau of Labor Statistics notes, the Producer Price Index (PPI) is a measure of inflation from the perspective of the seller, whereas CPI is inflation from the point of view of the consumer.

Year-on-year, the final demand index advanced 1.6% for February, the biggest YoY increase in a month’s PPI since September 2023.

With retail sales rising (the US Census Bureau recorded a 0.8% rise in for the same month) these escalating producer costs may well be passed on to the consumer.

Final demand rising

In fact, the data is already pointing that way.

According to the Bureau, final demand prices (the prices of goods going directly to various forms of consumers, rather than businesses or other sellers) increased 0.3 percent in January.

Before this, final demand prices had actually declined slightly the month before by 0.1 percent in December – despite it traditionally being a notoriously expensive month of the year for prices.

Bottom line

In spite of the potential promise of rate cuts soon, shoppers may find prices rising anyway in the next few months, as sellers contend with sticky inflation in the form of PPI. 

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