August PPI

Updated 24-Sep-08 20:09 ET

About this release

Highlights

Key Factors

Big Picture

The Big Picture here is not that complicated. The outlook for total PPI depends heavily on the trend in commodity prices. Those are very hard to predict. Core prices will be influenced by commodity prices as well, as evident in recent data. But weak demand will keep core prices relatively in check. Whether higher PPI prices can be passed along into CPI is questionable, given weak final demand. There will be pressures, obviously, but the outlook for consumer prices also depends heavily on commodity price trends.

Category	Aug	Jul	Jun	May	Apr
Finished Goods	-0.9%	1.2	1.8	1.4	0.3
Core	0.1%	0.4	0.1	0.2	0.3
Capital Equipment	0.0%	0.2	0.1	0.0	0.1
Consumer Foods	0.1%	0.1	0.1	0.3	0.0
Energy	-1.0%	0.7	1.3	1.0	0.0
Intermediate Materials	-1.0%	2.7	2.1	2.6	1.0
Core	1.2%	1.5	0.9	1.1	1.0
Crude Materials	-11.9%	4.2	3.7	6.6	4.7
Core	-0.3%	0.6	0.0	0.4	1.7

Release Details

PPI: Producer Price Index

Importance (A-F): This release merits a B-.
Source: Bureau of Labor statistics, U.S. Department of Labor.
Release Time: Around the 11th of each month at 8:30 ET for the prior month.
Raw Data Available At: http://stats.bls.gov/news.release/ppi.toc.htm.

The Producer Price Index measures prices of goods at the wholesale level. There are three broad subcategories within PPI: crude, intermediate, and finished. The market tracks the finished goods index most closely, as it represents prices for goods that are ready for sale to the end user. Goods prices at the crude and intermediate stages of production often provide an indication of coming (dis)inflationary pressures, but the closer you get to crude goods, the more that these prices track commodity prices which are already available in traded indexes such as the CRB (Commodity Research Bureau).

At all stages of production, the market places more emphasis on the index excluding food and energy, referred to as the core rate. Food and energy prices tend to be quite volatile and obscure trends in the underlying inflation rate. Though the market reaction is determined by the month/month changes, year/year changes are also noted by analysts. The index is not revised on a monthly basis, but annual revisions to seasonal adjustment factors can produce small adjustments to past releases.

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