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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 11/14/07 For Oct 2007 | |||||||||||||||||||||||||
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Highlights
Overall producer prices in October were tame overall while the core rate was flat. But there were some unusual component changes to keep the PPI soft. The overall PPI increased 0.1 percent, following a 1.1 percent boost in September. The October increase was well below the market forecast for a 0.4 percent advance. The core rate held steady with no change, following a 0.1 percent rise in September. The latest core rate came in below the consensus forecast for a 0.2 percent rise in the core rate.
For the overall PPI, the latest gain was kept soft by declines in energy and light trucks. By special groupings, energy fell 0.8 percent, following a 4.1 percent gain in September. Within energy, gasoline dropped 3.1 percent, residential gas fell 2.4 percent, and home heating oil declined 2.5 percent. Within energy, only residential electric power was up and only by 0.2 percent. The energy weakness was largely due to seasonal factors and will likely reverse sharply in coming months. Consumer food prices, however, continue their strong uptrend with a 1.0 percent increase, following a 1.5 percent jump in September. Within the core index, consumer goods rose 0.1 percent while capital equipment prices slipped 0.1 percent. Within the core and within capital equipment, weakness was led by a 2.7 percent fall in prices for light trucks. So, weakness in the overall PPI was due to a drop in truck prices and due to a temporary dip in energy costs.
Overall prices at the crude level jumped 2.4 percent in October, following a 0.1 percent up tick the month before. Excluding food and energy, crude prices increased 1.4 percent, following a 1.6 percent boost in September. At the intermediate level, prices edged up 0.1 percent, following a 0.4 percent rise in September. Excluding food and energy, intermediate prices rose 0.1 percent, matching the increase in the previous month.
The year-on-year rate for the overall PPI jumped to up 6.0 percent in October from up 4.4 percent in September. The year-on-year core rate came in at 2.5 percent in October, compared to up 2.0 percent in September.
Today's report looks very favorable at the surface. However, rising energy costs are likely to keep upward pressure on the PPI and inflation overall. Nonetheless, the bond and equity markets probably will like today's PPI numbers.
The producer price index in September rebounded 1.1 percent on higher oil prices, following a 1.4 percent drop in August. The core rate slowed to a 0.1 percent rise in September, following a 0.2 percent gain in August. Due to higher oil prices, we are likely to see a strong headline number for October. With import and export prices rising, U.S. producers may be starting to pass along higher prices and we may see that in the core PPI.
PPI Consensus Forecast for October 07: +0.4 percent
Range: +0.1 to +0.6 percent
PPI ex food & energy Consensus Forecast for October 07: +0.2 percent
Range: 0.0 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. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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