September 2017 Producer Price Index
Submitted by Atlas Indicators Investment Advisors on October 13th, 2017
Prices paid by producers and wholesalers continued rising in September 2017 according to the Producer Price Index released by the Bureau of Labor Statistics. After increasing 0.2 percent in August, this measure of inflation advanced 0.4 percent to end the third quarter. It has now increased 2.6 percent versus a year ago, the steepest annual increase since February 2012. Costs associated with both goods and services rose in the period.
Prices for final demand goods rose 0.7 percent, the largest uptick since jumping 1.0 percent in January. Final demand energy accounted for over 80 percent of September’s surge as it climbed 3.4 percent; disruptions in refining capacity created by Hurricane Harvey probably caused this unusual increase. Excluding the volatile food and energy components, goods still managed to increase 0.3 percent. However, the food index was unchanged.
Services rose 0.4 percent, the largest increase since April of this year when they climbed 0.5 percent. Growing margins in the trade services created most of the uptick. Additionally, transportation and warehousing services climbed 1.0 percent.
Earlier stages of output were mixed. Processed goods for intermediate demand advanced 0.5 percent, the fastest increase since April of this year. Like the final demand goods category, energy pushed this higher. Nevertheless, unprocessed goods for intermediate demand moved lower, falling 0.4 percent. Here we see food and feedstuffs pushing the category down. Finally, services for intermediate demand rose moderately, increasing 0.1 percent or half the pace of August.
As you can see in the graph above, producer prices are trending higher. The headline’s year-over-year tally (represented by the black line) is even higher than April when the goods portion (the blue line) was near its recent peak. Now prices for goods are reaccelerating even as the costs for services continue to pick up the pace. These movements will likely be part of the interest rate discussion at the next Federal Open Market Committee meeting.
