Summary: Prices received by producers increase in February, above expectations; smaller “core” PPI increase; most of rise from higher goods prices.
Around the end of 2018, the annual inflation rate of the US producer price index (PPI) began a downtrend which then continued through 2019. Months in which producer prices increased suggested the trend may have been coming to an end, only for it to continue, culminating in a plunge in April 2020. Figures returned to “normal” towards the end of the year and annual rates are now above average.
The latest figures published by the Bureau of Labor Statistics indicate producer prices rose by 0.5% after seasonal adjustments in February. The increase was above the 0.4% rise which had been generally expected but considerably less than January’s 1.3% jump. On a 12-month basis, the rate of producer price inflation after seasonal adjustments increased from 1.8% to 2.8%.
PPI inflation excluding foods and energy rose by just 0.2% after recording a 1.2% increase in December and a 0.1% increase in November. The annual rate accelerated from 2.0% to 2.5%.
US Treasury bond yields moved higher on the day, especially at the long-end. By the close of business, the 2-year yield had inched up 1bp to 0.15%, the 10-year yield had gained 9bps to 1.63% and the 30-year yield finished 8bps higher at 2.38%.
The BLS stated higher prices for final demand goods accounted for “most” of the month’s increase after they rose by 1.4% on average. Prices of final demand services rose by just 0.1%.
The producer price index (PPI) is a measure of prices received by producers for domestically produced goods, services and construction. It is put together in a fashion similar to the consumer price index (CPI) except it measures prices received from the producer’s perspective rather than from the perspective of a retailer or a consumer. It is another one of the various measures of inflation tracked by the US Fed, along with core personal consumption expenditure (PCE) price data.