Thursday's release of the January Producer Price Index (PPI) for Final Demand came in at 0.4% month-over-month seasonally adjusted, up from last month's 0.0%. It is at 2.7% year-over-year, up from 2.6% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) also came in at 0.4% MoM, up from the previous month and is up 2.2% YoY NSA. Investing.com MoM consensus forecasts were for 0.4% headline and 0.2% core.
Here is the summary of the news release on Final Demand:
The Producer Price Index for final demand increased 0.4 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in December and moved up 0.4 percent in November. (See table A.) On an unadjusted basis, the final demand index rose 2.7 percent for the 12 months ended in January.
In January, the rise in the index for final demand is attributable to a 0.3-percent increase in prices for final demand services and a 0.7-percent advance in the index for final demand goods.
The index for final demand less foods, energy, and trade services rose 0.4 percent in January, the largest advance since increasing 0.5 percent in April 2017. For the 12 months ended in January, prices for final demand lessfoods, energy, and trade services moved up 2.5 percent, the largest rise since 12-month percent change data were available in August 2014. 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.
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.
