July 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 (Final Demand) edged up 0.1% in June, above expectations of no change. The PPI is now up 2.0% year-over-year, while Core PPI, which excludes food and energy, is up 1.9% year-over-year. Core PPI also increased 0.1% in June and did not meet expectations of 0.2% growth. Trade services were down 0.2%. Energy lead in the largest decline again this month with a 0.5% decrease; while food bounced back gaining 0.6% month-over-month.
PPI had weak growth in June, relatively close to expectations. The PPI chart makes it clear that the Producer Price Index is not exceptionally volatile; however, there are volatile components such as energy and food prices. Our main focus is on Core PPI since it does not include these high volatile prices. Core PPI rose just under 2% year-over-year in June and supports the weaker inflation expectations in CPI. After oil prices caused PPI to drop in 2014 it has steadily risen and we expect this trend to continue moving forward.