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June Producer Price Index: Core Final Demand Up 0.3 MoM

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by: Doug Short
Summary

Friday's release of the June Producer Price Index for Final Demand came in at 0.1% month-over-month seasonally adjusted.

The Final Demand and Finished Goods indexes are highly correlated.

The Core Producer Price Index is far more volatile than the Core Consumer Price Index.

By Jill Mislinski

Friday's release of the June Producer Price Index (PPI) for Final Demand came in at 0.1% month-over-month seasonally adjusted, unchanged from last month. It is at 1.7% year-over-year, down from 1.8% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.3% MoM, up from 0.2% the previous month and is unchanged YoY NSA at 2.3%. Investing.com MoM consensus forecasts were for 0.1% headline and 0.2% core.

Here is the summary of the news release on Final Demand:

The Producer Price Index for final demand advanced 0.1 percent in June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.1 percent in May and 0.2 percent in April. (See table A.) On an unadjusted basis, the final demand index rose 1.7 percent for the 12 months ended in June, the lowest rate of increase since advancing 1.7 percent in January 2017.

In June, the rise in final demand prices is attributable to a 0.4-percent increase in the index for final demand services. Conversely, prices for final demand goods fell 0.4 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 its monthly updates.

As this (older) overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

Final Demand vs. Finished Goods
FRED® Graphs ©Federal Reserve Bank of St. Louis. All rights reserved.

Producer Price Index

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.

PPI CPI Core Comparison

Check back next month for a new update.

Original post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.