July Producer Price Index: Core Final Demand Up 0.5% MoM
Today's release of the July Producer Price Index (PPI) for Final Demand was at 0.6% month-over-month seasonally adjusted, up from a 0.2% decrease last month. It is at -0.4% year-over-year, up from -0.8% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.5% MoM, up from -0.3% the previous month and is up 0.3% YoY NSA. Investing.com MoM consensus forecasts were for 0.3% headline and 0.1% core.
Here is the summary of the news release on Final Demand:
The Producer Price Index for final demand increased 0.6 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed a 0.2-percent decline in June and a 0.4-percent advance in May. (See table A.) The July increase is the largest rise since a 0.7-percent advance in October 2018. On an unadjusted basis, the final demand index moved down 0.4 percent for the 12 months ended in July.
In July, the advance in the final demand index was led by a 0.5-percent rise in prices for final demand services. The index for final demand goods also moved higher, increasing 0.8 percent.
Prices for final demand less foods, energy, and trade services advanced 0.3 percent in July, the same as in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services edged up 0.1 percent, following three straight 12-month declines. 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.