January Producer Price Index: Core Final Demand Down 0.1% MoM

Today's release of the January Producer Price Index (PPI) for Final Demand came in at -0.1% month-over-month seasonally adjusted, unchanged from last month. It is at 2.0% year-over-year, down from 2.5% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.3% MoM, up from 0.0% the previous month and is up 2.6% YoY NSA. Investing.com MoM consensus forecasts were for 0.1% headline and 0.2% core.

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

The Producer Price Index for final demand edged down 0.1 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices also fell 0.1 percent in December and inched up 0.1 percent in November. (See table A.) On an unadjusted basis, the final demand index advanced 2.0 percent for the 12 months ended in January.

In January, the decline in the final demand index can be traced to a 0.8-percent decrease in prices for final demand goods. In contrast, the index for final demand services increased 0.3 percent. 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.

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Final Demand vs. Finished Goods

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

(Click on image to enlarge)

Producer Price Index

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.

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