Wednesday, May 15, 2013

U.S. PPI (Producer Price Index)

Producer Price Index
Released On 5/15/2013 8:30:00 AM For Apr, 2013
PriorConsensusConsensus RangeActual
PPI - M/M change-0.6 %-0.7 %-0.9 % to 0.1 %-0.7 %
PPI less food & energy - M/M change0.2 %0.2 %-0.2 % to 0.2 %0.1 %
Highlights
Headline PPI fell in line with expectations due to a drop in gasoline and also food prices. The core rate actually softened. The April producer price index fell 0.7 percent after a 0.6 percent decrease the month before. Analysts projected a 0.7 percent decline. The core rate, which excludes both food and energy, increased 0.1 percent after rising 0.2 percent in March. Expectations were for a 0.2 percent increase.

Food price fell 0.8 percent in April after rebounding 0.8 percent in March. Energy fell 2.5 percent in April after dropping 3.4 percent the month before. Gasoline decreased 6.0 percent, following a fall of 6.8 percent in March.

More detail coming.
Market Consensus before announcement
The producer price index in March fell back 0.6 percent after a strong 0.7 percent boost in February. The core rate, which excludes both food and energy, increased 0.2 percent after rising 0.2 percent in February. Analysts expected a 0.2 percent increase. Food prices rebounded 0.8 percent after falling 0.5 in February. Energy costs in March dropped 3.4 percent, following a 3.0 percent boost the month before. Gasoline fell 6.8 percent after spiking 7.2 percent in February. Within the core, almost one-quarter of the March advance was due to prices for civilian aircraft, which rose 0.7 percent. Also, pharmaceuticals increased 0.4 percent. Key players in the core, passenger car prices gained 0.2 percent while light trucks were flat.
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. The headline PPI (for finished goods) is a measure of the average price level for a fixed basket of capital and consumer goods for prices received by producers.  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