Not only was the PPI lower than expected, revisions were negative but still hot for July.
The Producer Price Index was unexpectedly negative in August, down 0.1 percent according to the BLS.
PPI Final Demand Month-Over-Month
- Final Demand: -0.1 percent
- Final Demand Services: -0.2 percent
- Final Demand Goods: 0.1 percent
- Final Demand Food: 0.1 percent
- Final Demand Excluding Food and Energy: -0.1 percent
PPI Final Demand Services
Final Demand Services Details
- The index for final demand services fell 0.2 percent in August, the largest decline since moving down 0.3 percent in April. The August decrease can be traced to a 1.7-percent drop in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.)
- The indexes for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services increased, 0.3 percent and 0.9 percent, respectively.
- Product Detail: Three quarters of the August decrease in prices for final demand services can be attributed to a 3.9-percent decline in margins for machinery and vehicle wholesaling. The indexes for professional and commercial equipment wholesaling, chemicals and allied products wholesaling, furniture retailing, food and alcohol retailing, and data processing and related services also moved lower. In contrast, prices for portfolio management advanced 2.0 percent. The indexes for truck transportation of freight and for apparel wholesaling also increased.
Final Demand Goods Details
- Prices for final demand goods inched up 0.1 percent in August, the fourth consecutive advance.
- Leading the August increase in the index for final demand goods, prices for final demand goods less foods and energy rose 0.3 percent. The index for final demand foods moved up 0.1 percent. Conversely, prices for final demand energy declined 0.4 percent.
- Product detail: A major factor in the August increase in the index for final demand goods was a 2.3-percent advance in prices for tobacco products. The indexes for beef and veal; processed poultry; printed circuit assemblies, boards, modules and modems; and electric power also rose. In contrast, prices for utility natural gas decreased 1.8 percent. The indexes for fresh and dry vegetables, chicken eggs, and copper base scrap also fell.
Falling prices for machinery and vehicles at the wholesale level are representative of glut of inventory and falling demand at the consumer level.
Intermediate Demand
The intermediate demand PPI is interesting. Tariffs are in play. I will comment separately.
PPI Final Demand Year-Over-Year
PPI Final Demand Year-Over-Year Details
- Final Demand: 2.6 percent
- Final Demand Services: 2.9 percent
- Final Demand Goods: 2.1 percent
- Final Demand Food: 3.5 percent
- Final Demand Excluding Food and Energy: 2.8 percent
Final demand goods is on an uptrend despite energy declining 1.9 percent year-over-year.
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