Oil Price Drop Leads PPI Decline

Led by a 2.9% decline in the index for energy goods, producer prices fell 0.4% in September versus an expectation for a 0.4% drop.

Year-over-year producer prices are up 8.7%, which is an improvement from the prior reading of up 9.6%.

Core producer prices, which exclude food and energy, were up 0.4% versus the consensus estimate of 0.2%. Core producer prices are up 3.8% year-over-year versus 3.6% in August.

Inflation levels remain elevated. However, the presumption now is that weakening demand should lead to a moderation in inflation pressures in coming months. Declines in the price indexes for crude and intermediate goods the last two months helps validate that view.

This consideration will help offset the disappointment linked to the higher-than-expected headline print for core PPI.