Producer Price Index: MoM PPI Rises More than Expected, But YoY Eases

Today's release of the Producer Price Index (PPI) for November shows a month-over-month increase in headline inflation pressures. The seasonally adjusted finished goods number was up 0.3% MoM and 5.9% year-over-year, down from last month's 6.1%. The interim YoY high was 7.2% in July. Core PPI (ex food and energy) was up 0.1% MoM and 2.9% YoY, an increase from last month's 2.8% and the highest YoY Core PPI since June 2009. Briefing.com had posted a MoM consensus forecasts of 0.1% for both Headline PPI and Core PPI. Here are a couple of snippets from the news release:

    "In November, the increase in the finished goods index was broad based with prices for finished consumer foods moving up 1.0 percent. The indexes for both finished goods less foods and energy and for finished energy goods inched up 0.1 percent.

    Finished foods: The index for finished consumer foods jumped 1.0 percent in November, the sixth consecutive monthly increase. Over half of the November advance can be attributed to the index for fresh and dry vegetables, which rose 11.5 percent. Higher prices for processed young chickens and meats also were factors in the increase in the finished consumer foods index. (See table 2.)

    Finished core: The index for finished goods less foods and energy advanced 0.1 percent in November after no change a month earlier. Leading this rise, the index for pharmaceutical preparations jumped 0.9 percent. Price increases for passenger cars also contributed to the advance in the finished core index.

    Finished energy: The index for finished energy goods edged up 0.1 percent in November after declining 1.4 percent in the prior month. Leading this increase was a 9.4-percent advance in home heating oil prices."

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. As we can see, Core PPI declined significantly during 2009 but had been rising since the late spring of last year. The increase had eased over the previous four months, but September saw a strong uptick.



As the next chart shows, the Core Producer Price Index is 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. But in recent months these two core metrics have been moving in tandem.