Producer Price Index Remains Negative Year-Over-Year [Dow Jones Industrial Average, SPDR S&P 500 ETF Trust]

inflationDoug Short: Today’s release of the May Producer Price Index (PPI) for Final Demand came in at 0.5% month-over-month seasonally adjusted. That follows the previous month’s -0.4% decline. Core Final Demand (less food and energy) came in at 0.1% month-over-month following a -0.2% change the month before. The forecasts were for 0.4% headline and 0.1% core.

The year-over-year change in seasonally adjusted Final Demand is -1.0%, the second lowest in the brief history of this data series, the lowest being the -1.3% in April.

Here is the summary of the news release on Finished Goods:

The Producer Price Index for final demand rose 0.5 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices fell 0.4 percent in April and advanced 0.2 percent in March. On an unadjusted basis, the final demand index declined 1.1 percent for the 12 months ended in May, the fourth straight 12-month decrease….

In May, the increase in the final demand index can be traced to prices for final demand goods, which rose 1.3 percent. The index for final demand services was unchanged. More…

Finished Goods: Headline and Core

The BLS shifted its focus to its new “Final Demand” series in 2014, a shift we fully 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.

The Headline Finished Goods for May came in at 1.5% MoM but is down -2.9% YoY. Core Finished Goods were up 0.3% MoM and 2.0% YoY.

Now let’s visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge over the past several months in headline PPI is, of course, energy related — now fractionally off its interim low set last month. Core PPI has remained relatively stable over the past year.

Producer Price Index

As the next chart shows, the Core Producer Price Index is far more volatile than the Core Consumer Price Index.

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