January 13, 2017 – The Producer Price Index (PPI) looks at the average change in selling prices from the viewpoint of domestic producers of both goods and services. Three areas of production are observed: industry-based, commodity-based and commodity-based final demand-intermediate demand.
The Producer Price Index experienced a 0.3% increase in December, in line with consensus expectations of a 0.2% increase. The PPI is now up 1.6% over the last year, while Core PPI, which excludes food and energy, is also up 1.6% year-over-year. Core PPI also increased 0.2% in December and beat expectations of 0.1% growth. Leading the increase was energy, up 2.6% (+5.9% year-over-year). Food rose 0.7% (-1.1% year-over-year) while service prices rose a mere 0.1% month-over-month.
The vital point from this report is that the inflationary pressure is moving in the right direction. There is no indication that inflation will suddenly flash up, yet all points show positive movement. It is still too early to see what 2017 will have in store, but more expected Fed hikes as well as a potential capital expenditure program by the new administration are certainly a few candidates to spark inflationary pressure that has been stagnant since the Great Recession.