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2008 Economic Calendar |
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Resource Center » U.S. & Intl Recaps | Release Dates | Why Investors Care | Today's Calendar
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The Producer Price Index (PPI) is a measure of the average price level for a fixed basket of capital and consumer goods received by producers. Why Investors Care
| Released on 4/13/07 For Mar 2007 | |||||||||||||||||||||||||
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Highlights
Producer prices continued strong overall in March but core prices flattened. The overall PPI jumped 1.0 percent in March, following a 1.3 percent spike in February. March's boost was above the market forecast for a 0.7 percent increase in the producer price index. The core rate slowed to no change in March, following a 0.4 percent increase in February. The markets had projected the core rate to rise 0.2 percent. Outside the core, both food and energy were strong. Within the core, consumer goods edged up while capital goods edged down.
The year-on-year rate for the overall PPI rose to up 3.1 percent in March from up 2.6 percent in February. The year-on-year core rate was slipped to up 1.6 percent in March from up 1.8 percent the prior month.
For the overall PPI, strength was food and energy components. By special groupings, energy increased a monthly 3.6 percent in March, following a 3.5 percent gain in February. March's boost was led by gasoline, up 8.7 percent; residential gas, up 3.3 percent; and home heating oil, up 1.8 percent. Consumer food prices rose 1.4 percent, following a 1.9 percent gain in February. The largest gain was for fresh & dry vegetables, which jumped 13.5 percent.
Keeping the core rate flat were a dip in capital equipment and a modest rise in consumer goods excluding food and energy. Capital equipment edged down 0.1 percent while core consumer goods rose 0.1 percent in March.
Overall prices at the crude level of production increased 3.2 percent, following an 8.9 percent surge in February. Excluding food and energy, crude jumped 7.7 percent, following a 2.7 percent increase in February. Prices at the intermediate level rose 1.0 percent in March, following a 1.0 percent gain in February. Excluding food and energy, intermediate prices increased 0.2 - the same pace as in February.
Today's report is a modest positive for inflation news - especially taking into account more recent softening in oil prices. This is good new both for equities and bonds.
The producer price index rebounded a sharp 1.3 percent in February, following a 0.6 percent drop the prior month. And the core rate firmed to a 0.4 percent boost in February, following a 0.2 percent increase in January. Much of the jump in the overall PPI was due to a large boost in energy (especially oil-related) but also due to higher food prices. For March, the impact of oil prices is uncertain. During March, oil prices swung sharply, declining during most of the month but then spiking the last week and a half. Most likely, the impact will be to pull the energy component down, given the greater portion of the month with declining oil prices. The core rate in February was led by a large increase in tobacco prices and also a significant boost in light truck prices. Neither is likely to be repeated in March.
PPI Consensus Forecast for March 07: +0.7 percent
Range: +0.5 to +1.0 percent
PPI ex food & energy Consensus Forecast for March 07: +0.2 percent
Range: +0.1 to +0.3 percent
![[Chart]](chart.gif)
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It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the PPI are mainly volatile because of sharp fluctuations in food and energy prices. The core PPI eliminates the sharper fluctuations. |
![[Chart]](chart_1.gif)
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Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core PPI does not fluctuate as much as the total PPI. |
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