U.S. Producer Prices Decline Unexpectedly With Lower Energy Prices

The Producer Price Index for final demand fell 0.3% during September (+1.4% y/y) following a 0.1% uptick during August. A 0.1% gain had been expected in the Action Economics Forecast Survey. Producer prices excluding food & energy fell 0.3% last month (+2.0% y/y) and reversed the prior month's increase. A 0.2% rise had been expected. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, held steady (1.7% y/y) last month after rising 0.4% in August.

A second straight 2.5% decline in energy prices (-8.7% y/y) weighed on the overall PPI last month. The decline reflected a 7.2% drop (-16.0% y/y) in gasoline prices after falling 6.6% in August. Home heating oil prices fell 1.3% last month (-13.7% y/y) after declining 12.1%. The cost of electric power fell 1.8% (+1.1% y/y) after improving 0.3%. Offsetting these declines was a 0.4% rise (0.7% y/y) in natural gas prices.

Moving 0.3% higher (2.7% y/y) were food prices following a 0.6% decline. Beef & veal prices strengthened 2.0% (4.5% y/y). Fish prices rebounded 0.9% both m/m and y/y after a sharp August decline. The cost of dairy products fell 0.7% (+5.7% y/) for a second straight month, and fresh & dried vegetable costs weakened 9.5% (NSA, +8.3% y/y). Fresh fruit & melon prices posted a 2.2% decline (-10.9% y/y). Egg prices surged 18.4% m/m (NSA, -6.8% y/y). Oilseed prices strengthened 1.6% (7.1% y/y) and the cost of bakery products rose 0.4% (1.8% y/y).

Prices for core goods for final demand eased 0.1% (+0.9% y/y) after holding steady in August. Core finished consumer goods prices were unchanged (1.9% y/y). Core nondurable consumer goods costs improved a steady 0.1% but the y/y change weakened to 2.6%, down from 3.8% y/y twelve months earlier. Durable consumer goods prices slipped 0.1% (+0.9% y/y). Passenger car prices improved 0.4% both m/m and y/y but appliance prices weakened 0.6% (NSA, +2.1% y/y). Private capital equipment costs held steady (1.7% y/y) after rising 0.1%. Government goods prices less food & energy eased 0.1% (+1.6% y/y) following a 0.1% improvement.

Services prices weakened 0.2% (+2.2% y/y) after rising 0.3%, while trade services prices declined 1.0% (+3.1% y/y). The cost of trade of finished goods fell 1.1% (+2.8% y/y). Passenger transportation fees fell 2.4% (+1.7% y/y) after rising 1.4% for two straight months. Transportation & warehousing costs fell 0.4% (+0.6% y/y), off for the third straight month. Services prices less trade, transportation & warehousing added 0.3% (2.1% y/y) to the prior month's 0.5% rise.

Construction costs edged 0.1% higher (5.5% y/y) for a second consecutive month. Private building costs gained 0.2% (5.4% y/y) but government building costs held steady (5.7% y/y).

Prices for intermediate demand fell 0.4% (-3.4% y/y), down for the fourth month in the last five.

The PPI data can be found in Haver's USECON database. Further detail can be found in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

Data-Dependent Monetary Policy in an Evolving Economy from Federal Reserve Chair Jerome H. Powell can be found here.