The Final Demand PPI ROSE by 0.2% in January, compared with market expectations for an increase of 0.1%. The Final Demand (excluding food energy and trade services) Core PPI ROSE by 0.1%, in line with market expectations.
The Finished Goods PPI ROSE by 0.6% in January. Food prices rose by 1.1% and are now 0.7% ABOVE their year ago level. Meanwhile energy prices rose by 0.4%. Gasoline prices plunged by 1.3%, heating oil costs rose by 2.3%, natural gas prices rose by 4.2% and electric power prices increased by 1.2%. Energy costs are now 1.6% ABOVE their year ago level. Overall producer prices are 1.5% ABOVE the year ago level. Year-over-year producer inflation peaked in July 2011 at 7.1%. Much of slowing since then has been because of lower energy prices despite this month's increase.
The Core Finished Goods PPI ROSE by 0.5%. Automobile prices increased by 0.5% while light truck prices rose by 0.1%. Meanwhile, computer prices were unchanged. Core producer prices are 1.7% ABOVE their year ago level. Year-over-year core producer inflation bottomed at 0.7% in October 2009, then rose through January 2012 to a peak of 3.1%. Since then, the year-over-year rate has topped out and begun a steady retreat.
Bottom Line: Starting with the release of January 2014 data, the “BLS is transitioning from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. The transition to the FD-ID system is the culmination of a long-standing PPI objective to improve the current SOP aggregation system by incorporating PPIs for services, construction, government purchases, and exports. In comparison to the SOP system, the FD-ID system more than doubled PPI coverage of the United States economy to over 75 percent of in-scope domestic production.”
Producer inflation increased in January. Energy prices continue to drive the headline, rising 0.4% after jumping 1.1% in December. Core prices rose modestly in line with expectations. Core intermediate goods inflation rose modestly and has increased by 0.4% in the last 12 months. Meanwhile, core crude goods inflation rose sharply but has declined by 3.4% in the last 12 months. Inflationary pressures at the producers level remain quite modest.