The Producer Price Index for Finished Goods advanced 0.6 percent in July, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This increase followed a 0.2-percent decline in June and a 0.9-percent rise in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods rose 0.6 percent in July compared with a 0.5-percent gain in June, and the index for crude materials climbed 1.2 percent subsequent to a 0.3-percent increase a month earlier. (See table A.)
PPI isn't as important an economic indicator as CPI. However, it's important to keep track of where this number comes in to see if producers are passing cost increases off to consumers.
The reporting on the figure was mixed.
From Bloomberg:
Prices paid to U.S. producers rose more than forecast in July on higher fuel costs. Excluding food and energy, the inflation rate was less than predicted.
The 0.6 percent gain followed a 0.2 percent decline in June, the Labor Department said today in Washington. So-called core producer prices that exclude fuel and food rose 0.1 percent, the smallest gain in three months.
The report may help ease the concerns of Federal Reserve policy makers, who reiterated at their meeting last week that inflation remains the biggest risk to the economy. Competition is restraining businesses from raising prices, even as overseas demand boosts raw materials costs.
``Prices look contained at the producer level,'' Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. ``It doesn't look like pipeline pressures are strong enough to push up prices at the consumer level that the Fed is concerned about.''
However, CBS.Marketwatch reported:
Led by a 2.5% increase in energy prices, wholesale prices increased a larger-than-expected 0.6% in July, the Labor Department reported Tuesday.
Wholesale food prices fell 0.1%, the third straight decline after hefty increases at the beginning of the year.
Excluding food and energy prices, the core producer price index increased 0.1%, as expected.
Economists surveyed by MarketWatch were expecting the PPI to rise 0.3% in July after a 0.2% decline in June.
Producer prices are up 4% in the past year, while core prices are up 2.3%, the biggest gain in nearly two years.
The report shows a mixed picture on wholesale inflation, with firms largely unable to pass along the higher costs they pay for crude materials and partially processed goods. Crude goods prices rose 1.2% in July, while prices for intermediate goods needing further processing rose 0.6%.
Simply eyeballing the last 6 months of total figures, this month's number appears to be right around the average.
Same report -- two different interpretations. As of this writing, the SPYs are down .54%.
