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Producer Prices:  Core Prices See Modest Acceleration

October 14, 2016
Bottom Line: Producer price inflation rose in September, a touch more than expected, as energy prices continue to drive the headline, rising 2.5% after slipping 0.8% in August. Final demand services rose slightly, while core prices rose modestly, slightly more than expected, and are up a modest 1.2% on a year-over-year basis. Overall inflationary pressures at the producer level continue to remain subdued.

The PPI ROSE by 0.3% in September, compared with market expectations for an increase of 0.2%. Year-over-year producer inflation peaked in June 2011 at 4.44%. Slowing since then has been because of lower energy prices. Overall producer prices are 0.7% ABOVE the year ago level.

The Goods PPI ROSE by 0.7% in September but is now 0.4% BELOW its year ago level. Food prices rose by 0.5% but are now 3.4% BELOW their year ago level. Meanwhile energy prices rose by 2.5%. but are now 2.4% BELOW their year ago level. The Goods PPI less food and energy ROSE by 0.3%, and is now 0.9% ABOVE its year ago level.

The Services PPI ROSE by 0.1% in September and is now 1.3% ABOVE its year ago level. The Core PPI ROSE by 0.2%, compared with market expectations for a increase of 0.1%. Year-over-year core producer inflation has retreated modestly since December 2014. Core producer prices are now 1.2% ABOVE their year ago level.