US Producer Prices Deflate in October, Biggest Drop Since April 2020

The October Producer Price Index (PPI) followed on with the disinflation tact being seen in some consumer prices, which keeps pass-through effects to the consumer less an issue. The market has responded in kind the last few days sending stocks sharply higher and yields sharply lower. Total PPI was down 0.5% month-over-month (consensus 0.1%), the biggest drop since April 2020, following a downwardly revised 0.4% increase (from 0.5%) in September. Core PPI, which excludes food and energy, was unchanged month-over-month consensus 0.3%) following a downwardly revised 0.2% increase (from 0.3%) in September. On a year-over-year basis, total PPI was up just 1.3% while core PPI was up 2.4%.

Inflation

The report coupled with consumer inflation data out yesterday shows an underlying price measure fell more than forecast despite the cost-of-living squeeze on US households. The recent fall in energy prices has been the big improvement. The key takeaway is the numbers reflects a sharp moderation in prices at the wholesale level, which should remain relatively subdued barring a future jump in energy prices, as the index for unprocessed goods for intermediate demand was down 1.4%.

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.

October 2023 PPI

US PPI Highlights.

  • PPI Final Demand (M/M) Oct: -0.5% (est 0.1%; prev 0.5%)
  • PPI Ex Food And Energy (M/M) Oct: 0.0% (est 0.3%; prev 0.3%)
  • PPI Final Demand (Y/Y) Oct: 1.3% (est 1.9%; prev 2.2%)
  • PPI Ex Food And Energy (Y/Y) Oct: 2.4% (est 2.7%; prev 2.7%)

Until last month annual producer inflation eased for 11 straight months, the least since December 2020. This month got back on track.

Where the price gains and losses were:

  • Good prices down 1.4%, the first decrease since May mainly due to a 15.3% drop in gasoline prices.
  • The indexes for diesel fuel; hay, hayseeds, and oilseeds; home heating oil; liquefied petroleum gas; and light motor trucks also fell.
  • In contrast, prices for tobacco products increased 2.4%.
  • The indexes for butter and for residual fuels also moved up.
  • Services prices were unchanged following six consecutive advances. Increases of 1.5% in the index for final demand transportation and warehousing services and 0.1% in prices for final demand

US PPI

US PPI Annually
US PPI Monthly

US Core PPI

 

United States Producer Prices Final Demand Less Foods and Energy YoY
US Core PPI Inflation Annually
US Core PPI Inflation Monthly

US October CPI

U.S. CPI was unchanged in October month-over-month (consensus 0.1%) following a 0.4% increase in September. Core CPI, which excludes food and energy, was up 0.2% month-over-month (consensus 0.3%) following a 0.3% increase in September. The shelter index, up 0.3%, again was the largest factor in the increase in core CPI. On a year-over-year basis, total CPI was up 3.2%, versus 3.7% in September, and core CPI was up 4.0%, versus 4.1% in September. This was the smallest 12-month change in core CPI since September 2021. The cost-of-living crisis deepens as real wages continue to suffer.

Source BLS

From the Traders Community News Desk