Producer Price Index:
YoY Headline Inflation Rises for the Second Month
Today's release of the December Producer Price Index (PPI) for finished goods shows a 0.4% month-over-month increase, seasonally adjusted, in Headline inflation. Today's data point matched the Investing.com forecast. Core PPI rose 0.3% from last month, topping the Investing.com forecast.
Year-over-year Headline PPI is at 1.23%, but that's a 0.92% increase from its 0.30% reading just two months ago. The YoY 1.41% Core PPI is a slight rise from last month's 1.31%.
Here is the essence of the news release on Finished Goods:
Leading the December rise in the finished goods index, prices for finished energy goods increased 1.6 percent. Also contributing to the advance, the index for finished goods less foods and energy moved up 0.3 percent. By contrast, prices for finished consumer foods decreased 0.6 percent.
Finished energy: Prices for finished energy goods climbed 1.6 percent in December, the largest advance since a 2.5-percent jump in June 2013. Over half of the rise in December can be traced to a 2.2-percent increase in the gasoline index. Higher prices for diesel fuel and home heating oil also were factors in the advance in the finished energy goods index. (See table 2.)
Finished core: The index for finished goods less foods and energy moved up 0.3 percent in December, the largest advance since a 0.5-percent rise in July 2012. Nearly half of the December increase is attributable to prices for tobacco products, which climbed 3.6 percent. Higher motor vehicle prices also contributed to the advance in the finished core index.
Finished foods: The index for finished consumer foods fell 0.6 percent in December following no change in November. Leading the decrease, prices for fresh and dry vegetables dropped 13.4 percent. More...
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, the YoY trend in Core PPI (the blue line) declined significantly during 2009 and stabilized in 2010, increase in 2011 and then began falling in 2012. Now, in the last quarter of 2013, the YoY rate is approximately the same as in mid-2010. The more volatile Headline number is fractionally off the bottom of its range since the early months of the recovery from the Great Recession.
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. Since 2012, Core PPI steadily trended downward but has bounced fractionally in recent months. Since January of this year, Core PPI has come in below Core CPI every month except June, when there was a tiny 0.01% crossover.
Check back next month for a new update.