July 2018 Producer Price Index

Prices paid by producers and wholesalers were unchanged in July 2018 according to the Bureau of Labor Statistics.  Their producer price index (PPI) held steady after rising 0.3 percent in June and 0.5 percent in May. The unchanged statistic was a result of a 0.1 percent rise in the index for final demand goods offsetting a 0.1 percent decline in prices for final demand services.  Versus a year earlier, this price proxy is 3.3 percent higher

Costs associated with earlier stages of output were mostly higher.  Processed goods for intermediate demand were unchanged as food & feeds as well as energy costs fell while the other segments rose. Year-over-year, prices for this stage of goods output are 6.8 percent higher.  Unprocessed goods for intermediate demand jumped 2.7 percent after falling 1.0 percent in June. Foodstuffs & feedstuffs declined 2.0 percent, but the costs associated with the earliest stage energy materials jumped 8.6 percent.  The nonfood materials less energy category fell 1.2 percent. 

Prices for early-stage services accelerated in July as did its trend.  After increasing just 0.1 percent in June, this portion of the report tacked on another 0.2 percent to start the second half of the year.  Compared to a year earlier, this segment of services is 3.0 percent more expensive. 

Price trends are rising. However, they have yet to sustain levels at which we might be concerned.  It still seems like a steady pace of interest rate hike by the Federal Reserve’s Federal Open Market Committee is the most plausible course of action.  If cost pressures begin accelerating at a more worrisome pace, Atlas will send a note to you about it.