Bidenflation Rises: Producer Prices Rising Faster Than Expected

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Andrew Caballero-Reynolds, iStock/Getty Images; BNN

Prices paid to U.S. producers of goods and services rose by 0.5 percent in September, the Labor Department said Wednesday.

Economists had forecast a milder 0.3 percent increase. In August, the Labor Department’s producer price index for final demand rose 0.7 percent compared with the prior month.

The core producer price index, which excludes food and energy prices, rose 0.3 percent, an acceleration from the prior month’s 0.2 percent increase.

Over the past 12 months, the producer price index is up 2.2 percent. That’s a big jump from the 1.6 percent annual increase originally recorded in August. The August figure was revised up to show prices had increased two percent, indicating inflation was stronger than previously thought.

Economists had forecast a 1.7 percent annual increase.

Core producer prices rose 2.7 percent, a bigger increase than the 2.2 percent annual increase in August and above the 2.1 percent consensus forecast.

The producer price index is a monthly index of prices paid to U.S. producers of goods and services. It includes purchases made for capital investment, government purchases, and exports paid by foreign customers of U.S. makers. It excludes imports and does not count sales taxes. It is a sister gauge of inflation to the consumer price index, which measures prices paid by U.S. consumers. The consumer price index includes imports and taxes but excludes exports.

The headline PPI numbers come from a gauge of “final demand,” which measures prices received from customers who are the end-users of products.

A gauge often called “core core” producer prices—which excludes food, energy, and a measure of retail and wholesale margins called “trade services”—rose 0.2 percent for the month, matching the previous month’s increase. On a year-over-year basis, core core producer prices were up 2.8 percent, a tick below the 2.9 percent increase recorded in August.

The August core-core figures were revised down slightly, from 0.3 percent on a monthly basis and three percent annually.

The Department of Labor also tracks PPI for “intermediate demand,” which tracks the prices of goods and services for purposes other than capital investment. These include prices of materials and components used in the production of final demand goods and services.  Loans made to consumers, for example, count as final demand while loans made to businesses count as intermediate demand.

The government said prices for processed goods for intermediate demand rose 0.5 percent in September. The index for unprocessed goods for intermediate demand rose 4.0 percent, an increase driven by a 7.5 percent increase in the prices of unprocessed energy materials, especially crude oil. Prices for intermediate demand services moved up 0.3 percent. A major factor in the services increase was a jump in rents for retail properties.

The producer price index is sometimes referred to as a “wholesale index,” a hangover from the days when a predecessor measure of inflation was officially called the wholesale price index. Even under the earlier name, however, the index was not primarily a tracker of wholesale prices, which made the name misleading. A small part of the intermediate demand index tracks wholesale prices but the headline final demand index is in no way a wholesale index.

 

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