U.S. PPI Firms With Higher Food Prices, Core Price Gains Still Trending Lower

U.S. producer prices for finished goods rose 0.3% last month following their 1.2% downdraft during March. The latest rise outpaced Consensus expectations for a 0.1% uptick. It did not, however, represent a broad-based firming of the recent weakness in pricing power. In fact pricing power was very limited. · Finished food prices jumped 1.5% m/m led by firm gains in beef (-4.2% y/y) & vegetable (1.3% y/y) prices as well as a notable 43.7% surge in egg prices (-4.0% y/y). That surge was, however, just recovering declines during the prior two months.

Energy prices ticked 0.1% lower (-25.2% y/y) after their 5.5% decline during March. Finished gasoline prices rose 2.6% which reversed just a piece of a 13.1% decline in March (-46.7% y/y). That monthly increase was offset, however, by a 6.2% decline in natural gas prices (-18.1% y/y).

Prices of core finished consumer goods rose another 0.2%. The gain left the y/y increase at a respectable 3.8% but the trend has been moving lower since the end of last year. Durable consumer goods prices increased 0.3% after having been unchanged during March but, here again, the trend rate of gain has eased. On a three-month basis prices have risen at a 2.0% annual rate versus a 6.4% rise last October. The three-month gain in core nondurable goods prices also has eased to 3.4% (AR), half the peak rate of increase last fall. Finally, capital equipment prices have started to fall. The April decline of 0.1% added to a 0.2% March drop and that was enough to pull the three-month change negative versus a 5%+ rate of increase as of last fall.

Falling again were prices for intermediate goods and that should foreshadow even lower finished goods prices. Intermediate goods prices dropped another 0.5% pulling the year-to-year change to still another record rate of decline of 10.4%. Excluding food & energy prices continued to move lower, last month by 0.9% which was their seventh monthly decline. Pricing here has been so weak that the 3.8% y/y decline was a record drop for the series which dates back to 1974.

The crude materials PPI prices rose for the first month since last summer. The modest 3.0% rise reflected higher food prices which still are down a sharp 18.7% y/y. Core pricing power continued to reflect the weak economy and prices fell 0.6%. They remained down by more than one-third versus last year due to lower metals and chemicals prices.

The Producer Price Index data is available in Haver's USECON database. More detailed data is in the PPI and in the PPIR databases.

Rethinking the Implications of Monetary Policy: How a Transactions Role for Money Transforms the Predictions of Our Leading Models from the Federal Reserve Bank of Philadelphia can be found here.