The Producer Price Index year-over-year inflation grew from 2.8 % to 3.1 %.

Analyst Opinion of Producer Prices

The Producer Price Index again surged year-over-year. Here is what the BLS said in part:

In November, three-fourths of the rise in the final demand index is attributable to a 1.0-percent increase in prices for final demand goods. The index for final demand services climbed 0.2 percent.

This much gain in the Producer Price Index was not expected – and unless you are the twisted follower of the Fed – this increase is not good economically.

The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.

The market had been expecting (from Bloomberg):

month over month change Consensus Range Consensus Actual PPI-Final Demand (PPI-FD) 0.2 % to 0.5 % +0.3 % +0.4 % PPI-FD less food & energy (core PPI) 0.1 % to 0.3 % +0.2 % +0.3 % PPI-FD less food, energy & trade services 0.2 % to 0.3 % +0.3 % +0.4 %

The producer price inflation breakdown:

category month-over-month change year-over-year change final demand goods +0.1 %   final demand services +0.2 %   total final demand +0.4 % +3.1 % processed goods for intermediate demand +0.5 % +5.3 % unprocessed goods for intermediate demand +3.2 % +10.6 % services for intermediate demand +0.7 % +3.2 %

 

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In the following graph, one can see the relationship between the year-over-year change in intermediate goods index and finished goods index. When the crude goods growth falls under finish goods – it usually drags finished goods lower.

Percent Change Year-over-Year – Comparing PPI Finished Goods (blue line) to PPI Intermediate Goods (red line)