Wednesday's release of the February Producer Price Index (PPI) for Final Demand came in at 0.2% month-over-month seasonally adjusted, down from last month's 0.4%. It is at 2.8% year-over-year, up from 2.7% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) also came in at 0.2% MoM, down from the previous month and is up 2.5% YoY NSA. Investing.com MoM consensus forecasts were for 0.1% headline and 0.2% core.
Here is the summary of the news release on Final Demand:
The Producer Price Index for final demand advanced 0.2 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.4 percent in January and were unchanged in December. (See table A.) On an unadjusted basis, the final demand index increased 2.8 percent for the 12 months ended in February.
In February, the rise in final demand prices is attributable to a 0.3-percent advance in the index for final demand services. In contrast, prices for final demand goods edged down 0.1 percent.
The index for final demand less foods, energy, and trade services climbed 0.4 percent in February, the same as in January. For the 12 months ended in February, prices for final demand less foods, energy, and trade services increased 2.7 percent, the largest rise since 12-month percent change data were available in August 2014. More…
Finished Goods: Headline and Core
The BLS shifted its focus to its new "Final Demand" series in 2014, a shift we support. However, the data for these series are only constructed back to November 2009 for Headline and April 2010 for Core. Since our focus is on longer-term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates.
As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.
FRED® Graphs ©Federal Reserve Bank of St. Louis. All rights reserved.
As the next chart shows, the Core Producer Price Index is far more volatile than the Core Consumer Price Index. For example, during the last recession producers were unable to pass cost increases to the consumer.
Check back next month for a new update.