Sometimes producer prices lead consumer prices; sometimes they don’t - but in the sense that sometimes there is no lag at all before increases show up in consumer prices. In any event, overall the message from the producer price index this morning was benign, with very little pressure “in the pipeline” for consumer inflation.

To begin with, raw commodity prices (red) declined -1.2% in September, continuing their 2+ year downtrend; while final demand prices (blue) increased less than 0.1%:

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On a YoY basis, commodity prices are down -2.5%, while final demand producer prices are only up 1.8%:

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About the only place where any  (slight) upward pressure shows up is in final demand producer prices for services (gray), which increased 0.2% in September. Final demand producer prices for goods (gold) declined -0.2%:

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On a YoY basis, goods prices are down -1.1%, while services prices are up 3.1%:

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There appears to be a slight upward trend in services inflation, but it is within the range of noise as well.

In short, today’s producer price report, like yesterday’s consumer price report, was almost entirely benign.

I should also point out that typically a decline in commodity prices is taken as a sign of weakening demand (bad) rather than, as it was in 2022-23, a glut of supply (good). And on a global scale, the decline in goods prices probably is more about weakening demand now. But that weakening demand, so far as I have read, is all about China. And since the market is global, this is almost certainly a net boon to the domestic US economy. 

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