US Producer price inflation for February (PPI) declined 0.1% month-over-month (consensus +0.3%) following a downwardly revised 0.3% increase (from 0.7%) in January. On a year-over-year basis, the index for final demand was up 4.6%. Core, excluding food and energy, the index for final demand was flat month-over-month (consensus +0.4%) following a downwardly revised 0.1% increase (from 0.5%) in January. On a year-over-year basis, this index was up 4.4%. The release was in line with a moderating Consumer Price Index we saw yesterday.
In turn that brings back to the fore the Fed’s monetary policy path with month-over-month declines in pipeline measures that include the index for processed goods for intermediate demand (-0.4%) and the index for unprocessed goods for intermediate demand (-3.8%).
The Federal Reserve has been on an aggressive path to reducing historically high U.S. inflation, we are a long way from the Central Bank transitory mantra.
February 2023 PPI
- PPI Final Demand (M/M) Feb: -0.1% (exp 0.3%; prevR 0.3%)
- PPI Ex Food And Energy (M/M) Feb: 0.0% (exp 0.4%; prevR 0.1%)
- PPI Final Demand (Y/Y) Feb: 4.6% (exp 5.4%; prevR 5.7%)
- PPI Ex Food And Energy (Y/Y) Feb: 4.4% (exp 5.2%; prevR 5.0%)
Where the price falls were:
- Goods prices decreased by 0.2%, after a 1.2% rise in January,
- Food (-2.2%) of which chicken eggs (-36.1%); and energy (-0.2%).
- The indexes for residential natural gas, fresh and dry vegetables, diesel fuel, home heating oil, and primary basic organic chemicals also fell.
- Services cost went down 0.1%, the same as in the prior month.
- Margins for final demand trade services fell 0.8% and prices for final demand transportation and warehousing services decreased 1.1%.
Where the price rises were:
- The index for final demand services less trade, transportation, and warehousing advanced 0.3%
US Core PPI
PPI was released after of consumer price data for February. Annual inflation cooled for the seventh straight month to 6.0% in February, however the pace of easing is starting to level off. The release came as concerns over an increasingly fragile financial system following the implosion of two regional banks. The fragility is complicating policymakers’ already bumpy path to slowing the economy. CPI is down notably from June’s peak 9.1% but had muted progress since January’s year-over-year increase of 6.4 per cent. Prices rose 0.4 per cent in February compared with the month before
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