Producer Prices: Supply Chain Disruptions Broadly Deflationary
March 12, 2020
Bottom Line: Producer inflation dropped in February as energy prices continued to drive the headline, dropping 3.6% after slipping 0.7% in January. The index for final demand services fell 0.3 percent in February, the largest decline since moving down 0.3 percent in September 2019. Reversing gains from January, over 70 percent of the broad-based decrease can be traced to margins for final demand trade services, which dropped 0.7 percent. Overall core prices fell modestly, coming in below expectations as the initial impact of supply-chain disruptions was broadly deflationary. Overall inflationary pressures at the producer level continue to remain subdued and trending lower. The PPI FELL by 0.6% in February, compared with market expectations for an increase of 0.1%. Overall producer prices are 1.3% ABOVE the year-ago level. The Goods PPI FELL by 0.9% in February but is now 0.6% ABOVE its year-ago level. Food prices fell by 1.6% but are now 1.1% ABOVE their year-ago level. Meanwhile, energy prices fell by 3.6%. but are now 0.3% ABOVE their year-ago level. The Goods PPI less food and energy FELL by 0.1%, but is now 0.5% ABOVE its year-ago level. The Services PPI FELL by 0.3% in February but is now 1.5% ABOVE its year-ago level. The Core PPI FELL by 0.3%, compared with market expectations for an increase of 0.2%. Core producer prices are now 1.3% ABOVE their year-ago level.
Article by Contingent Macro Advisors