Today's release of the February Producer Price Index (PPI) for Final Demand came in at 0.3% month-over-month seasonally adjusted, down from last month's 0.6%. It is at 2.2% year-over-year, up from 1.6% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.3% MoM, up from 0.4% the previous month and is up 1.5% YoY. Investing.com MoM consensus forecasts were for 0.1% headline and 0.2% core. YoY Headline PPI is currently at an interim high and its highest since 2012.
Here is the summary of the news release on Final Demand:
The Producer Price Index for final demand increased 0.3 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.6 percent in January and 0.2 percent in December. (See table A.) On an unadjusted basis, the final demand index climbed 2.2 percent for the 12 months ended February 2017, the largest advance since a 2.4-percent increase in the 12 months ended March 2012.
In February, over 80 percent of the advance in the final demand index is attributable to a 0.4-percent increase in prices for final demand services. The index for final demand goods moved up 0.3 percent.
Prices for final demand less foods, energy, and trade services rose 0.3 percent in February, the largest increase since a 0.3-percent advance in April 2016. For the 12 months ended in February, the index for final demand less foods, energy, and trade services climbed 1.8 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 overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.
FRED® Graphs ©Federal Reserve Bank of St. Louis. All rights reserved.
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 that began in mid-2014 in headline PPI is, of course, energy related. It is now off its interim low set in April of last year. Year-over-year Core PPI, now at 1.6%, has trended lower from its 2.3% interim high set the middle of last year.
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.
Check back next month for a new update.