Headline PPI in September rose .4% m/o/m, two tenths more than expected but partly offset by a one tenth downward revision to August which fell .2%. The core rate up .3% was actually one tenth below expectations when we include the also one tenth lower revision to the month prior. On a y/o/y basis, headline PPI was up 8.5% vs 8.7% in August. The core rate was higher by 7.2% vs 7.3% in the month before. Food and energy prices rebounded after the August drop.
Goods prices ex energy was actually unchanged m/o/m. Service prices grew by .4% m/o/m led by a 6.4% rise in “traveler accommodation services.” Also, prices were higher for food/alcohol retailing, portfolio management, machinery and vehicle wholesaling along with oil/gas services and hospital inpatient care. Prices fell for transporation and warehousing by .2% m/o/m reflecting in part the notable drop we’ve seen in shipping costs.
With regards to inflation in the pipeline, processed goods prices ex food and energy fell for a 3rd straight month, though are still higher by 13.1% y/o/y. Unprocessed goods prices rose for a 2nd month but after declines in the prior three. They are still up 34% y/o/y.
Bottom line, all in the data was about as expected but the still elevated levels will continue to flow thru eventual consumer prices. That said, goods prices have not just peaked but are showing many signs of falling while at the same time services inflation will remain pretty persistent. Inflation breakevens are higher on the day by about 4 bps while long end yields are slightly higher but have been in response to the selling that’s going on in Europe.
Headline PPI
Core PPI
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.