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Producer Price Index
Released On 3/17/2009 8:30:00 AM For Feb, 2009
PriorConsensusConsensus RangeActual
PPI - M/M change0.8 %0.4 %0.0 % to 1.2 %0.1 %
PPI -Yr/Yr change-1.3 %0.1 %0.0 % to 0.3 %-1.6 %
PPI less food & energy - M/M change0.4 %0.1 %0.0 % to 0.3 %0.2 %
PPI less food & energy - Yr/Yr change4.2 %3.8 %3.7 % to 4.0 %3.9 %

Highlights
The producer price index in February posted a second consecutive increase with energy leading the way but not as much as expected. Meanwhile, the core rate slowed somewhat. The overall PPI rose 0.1 percent, following a 0.8 percent boost in January. The February increase was below the market forecast for a 0.4 percent gain in the headline PPI. The core PPI rate eased to 0.2 percent rise after a 0.4 percent increase the prior month. The latest number came in above the consensus call for a 0.1 percent uptick. For the latest month, headline inflation saw significant cross currents. Energy increased 1.3 percent after a 3.7 percent boost in January. But food continued its decline, dropping 1.6 percent in the latest month after a 0.4 percent decline in January. The fall in food prices is largely why the headline number came in lower than expected.

The stronger-than-expected rise in the core rate was led by a 2.7 percent jump in tobacco and a 1.3 percent increase for light trucks.

For the overall PPI, the year-on-year rate eased to minus 1.6 percent in February from down 1.3 percent the month before (seasonally adjusted). The core rate slowed to up 3.9 percent from up 4.2 percent in January.

Overall, the February PPI report indicates that price pressures are easing despite some firming in energy costs. This should be good for bonds other than the housing starts report came in notably stronger than expected.

Market Consensus before announcement
The producer price index in January jumped sharply - both at the headline and core levels. The overall PPI rebounded 0.8 percent, following a 1.9 percent fall in January. Meanwhile, the core PPI rate surged 0.4 percent after a 0.2 percent increase the month before. For the latest month, headline inflation was pumped up by a jump in energy which increased 3.7 percent after a 9.1 percent fall in December. Food actually fell 0.4 percent in the latest month. Temporary factors were likely in play for the boost in the core. Pharmaceuticals jumped 1.1 percent while tobacco spiked 0.6 percent. Pharmaceuticals can be sporadic as price changes by drug companies can be infrequent and lumpy. Changes in tobacco prices also can be sporadic and difficult to seasonally adjust. Prices for light trucks increased 0.5 percent and may be coming off earlier discounting. So, we are likely to see some reversal of these factors in February for the core rate.

Definition
The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measure the average change over time in the prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. Effective with the January 2014 PPI data release in February 2014, BLS transitioned from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. The headline PPI (for Final Demand) measures price changes for goods, services, and construction sold to final demand: personal consumption, capital investment, government purchases, and exports.  Why Investors Care
 
[Chart]
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.
Data Source: Haver Analytics
 
[Chart]
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.
Data Source: Haver Analytics
 

 

2009 Release Schedule
Released On: 1/152/193/174/145/146/167/148/189/1510/2011/1712/15
Release For: DecJanFebMarAprMayJunJulAugSepOctNov
 


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