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Whenever the Bureau of Labor Statistics releases the Producer Price Index [PPI], we like to go through the data to see which industries are experiencing better (or worse) than normal pricing power. Sometimes this can lead to insights as to which industries would make better investments. For example, the first chart of the year/year change in corrugated box prices shows fairly strong supply/demand characteristics for the box industry. Furthermore, they may signal strength in the transportation companies that move those boxes.


However, the data seems to indicate that railroad pricing may be softening.


The next chart shows the PPI for Petroleum lubricating oil and greases. No surprise that oil prices are going up.


The rise in oil prices is having an effect on petrochemical prices as well, but since the cost of inputs is rising by as much it doesn’t indicate pricing power so much as the ability to pass along the price increases that are going into the process. It’s still better than having to absorb them, though.


Iron and steel mill prices are accelerating rapidly.


As are aluminum.


And industrial valves.


But farm equipment manufacturers are losing pricing power.


As are construction equipment makers (housing slowdown?)


Computer makers seem to be competing more fiercely than the PPI data indicates. Is the disconnect investable?


Semiconductor makers are losing pricing pressure, and we think it will get much worse.

semi ppi

Source: Breaking Down Yesterday's PPI Reports: Crude and Chemicals Leading Rise in Pricing