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Producer Price Index: In Line with Expectations

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    April 17, 2015

    Yesterday’s release of the March Producer Price Index (PPI) for Final Demand came in at 0.2% month-over-month seasonally adjusted. That follows the previous month’s -0.5% decline. Core Final Demand (less food and energy) also came in at 0.2% month-over-month following a -0.5% change the month before. The Investing.com forecasts were for 0.2% headline and 0.2% core.

    The year-over-year change in Final Demand is -0.8%, the lowest in the brief history of this data series.

    Here is the summary of the news release on Finished Goods:

    The Producer Price Index for final demand increased 0.2 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved down 0.5 percent in February and 0.8 percent in January. On an unadjusted basis, the index for final demand decreased 0.8 percent for the 12 months ended in March….

    In March, more than half of the rise in final demand prices can be attributed to a 0.3-percent advance in the index for final demand goods. Prices for final demand services moved up 0.1 percent. More…

    Finished Goods: Headline and Core

    The BLS shifted its focus to its new “Final Demand” series in 2014. I fully support this shift. However, the data for these series are only constructed back to November 2009 for Headline and April 2010 for Core. Since my focus is on longer term trends, I continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates.

    The Headline Finished Goods for March came in at -0.52% MoM and is down -3.25% YoY. Core Finished Goods were up 0.52% MoM and 2.02% YoY.

    Now let’s visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge over the past several months in headline PPI is, of course, energy related — now fractionally off its interim low set last month. Core PPI has remained relatively stable over the past year.

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    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. Likewise in 2010 the Core PPI generally rose while Core CPI generally fell. Since 2012, Core PPI steadily trended downward to its interim low in August of 2013. It rose in the final months of 2013 and has remained in a relatively narrow range since then.

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    Check back next month for a new update.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.


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