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Producer Prices: Slowly Cooling

September 14, 2022
Bottom Line:  Producer prices fell in August, slightly more than expected, amid lower energy prices. Final demand less food and energy rose slightly more than expected but was lower on a year-over-year basis and trending in the right direction, up 4.3% annualized over the last three months versus 6.6% in the last six months and 7.26% year-on-year. Processed goods prices fell again and were down 7.6% annualized in the last three months. Unprocessed goods rebounded were still lower by nearly 4.3% over the last three months. Final demand services continued to see upward price pressures, but the trend showed deceleration, up just over 4% annualized compared with 5.8% and 6.6% over the last six and 12 months.
Overall, this report is a bit more encouraging that price pressures are easing than the CPI report. Goods prices should continue to ease, barring another sharp increase in energy prices. And the trends on the services side of the economy (outside of trade/transportation, which tends to correlate with goods prices) are largely to the downside with year-on-year readings already near 2% without trade/transport. That suggests we could easily be seeing sub-4 % year-on-year producer prices by early next year and possibly even sub-3% by the middle of next year. 
The PPI FELL by 0.1% in August, compared with market expectations for a decline of 0.1%.  Overall producer prices are 8.7% ABOVE the year-ago level.
The Goods PPI
FELL by 1.2% in August but is now 12.2% ABOVE its year-ago level. Food prices rose by 0.0% and are now 13.0% ABOVE their year-ago level.  Meanwhile, energy prices fell by 6.0%. but are now 26.0% ABOVE their year-ago level. The Goods PPI less food and energy  ROSE by 0.2%,  and is now 8.1% ABOVE its year-ago level.
The Services PPI
ROSE by 0.4% in August and is now 6.6% ABOVE its year-ago level.
The Core PPI
ROSE by 0.4%, compared with market expectations for an increase of 0.3%.  Core producer prices are now 7.3% ABOVE their year-ago level.
Article by Contingent Macro