U.S. Producer Price Index is Revamped; Shows a Pickup in Inflation Pressures

The Producer Price Index underwent major revision this month. It now includes prices for final demand of goods, services and construction as well as a reading of intermediate demand prices. The overall final demand PPI rose 0.2% in January (1.2% y/y) following a 0.1% uptick and no change in the prior two months. The 0.4% rise (0.9% y/y) in final demand for goods prices was the strongest gain in six months. A quickened 1.0% rise (-0.7% y/y) in food prices reflected a 1.1% gain (0.7% y/y) for consumers, a 1.4% increase (2.3% y/y) in the government sector and a 0.7% rise (-9.2% y/y) in export prices. Energy prices for final demand increased 0.3% (0.9% y/y). Prices for final demand excluding food and energy jumped 0.4% (1.3% y/y), the quickest monthly increase in two years. Finished core consumer goods prices were even stronger, however, and surged 0.7%. That pulled the y/y increase up to 2.1%.

There is a breakout of trade services prices in the new formula and they rose a fairly stable 0.1% (1.3% y/y). Prices for core final demand services ticked up 0.1% (1.8% y/y). A breakout of prices for construction final demand rose 0.6% (3.1% y/y). Prices at the intermediate demand level rose 0.6% (0.3% y/y).

Measured using the previous formula, which is being phased out as the headline series, producer prices increased 0.6% in January (1.5% y/y) after a 0.4% December rise. Expectations were for a 0.2% gain. Energy prices improved 0.4% (1.6% y/y) and food costs rose 1.1% (0.7% y/y). Prices excluding food & energy increased 0.5% (1.7% y/y) versus an expected 0.1%. Consumer goods prices provided the strength here and gained 0.7% (1.6% y/y) while capital equipment prices rose a moderate 0.2% (1.2% y/y).

The PPI data are contained in Haver's USECON database with further detail in PPI and PPIR. The expectations figures are available in the AS1REPNA database.