Producer Prices Rise Double Expected Rate As Fuel Price "Noise" Won't Go Away

Tyler Durden's picture

PPI Final Demand rose 1.9% year-over-year (tied for 3rd highest in a year) as it appears Janet Yellen's transitory "noise" just won't go quietly into the night (though has fallen for 2 months in a row). While the headline print was not helped by a 2.1% surge in fuel prices, Core PPI (ex Food and Energy) rose more than expected (at 1.8% vs 1.7% expected) holding near its highest since Dec 2012. On a sequential basis, the headline 0.4% increase was double the 0.2% expected, while the core M/M rise of 0.2% was in line with expectations.

The PPI components broken down by goods and services.

Core PPI:



So what was the reason for the headline spike? Two months ago it was a huge jump in food costs. This time: energy costs, read gas.

The breakdown: all about energy.

Final demand goods:

The index for final demand goods increased 0.5 percent in June compared with a 0.2-percent decrease in May. Nearly 90 percent of the advance can be traced to prices for final demand energy, which climbed 2.1 percent in June. The index for final demand goods less foods and energy edged up 0.1 percent. In contrast, the index for final demand foods declined 0.2 percent.


Product detail: In June, a 6.4-percent advance in gasoline prices accounted for most of the increase in the final demand goods index. Prices for residential electric power, pharmaceutical preparations, meats, fresh and dry vegetables, and soft-cake bakery products also rose. Conversely, the index for grains dropped 12.5 percent in June. Prices for residential natural gas and light motor trucks also declined.


Final demand services: Prices for final demand services increased 0.3 percent in June subsequent to a 0.2-percent decline a month earlier. Nearly two-thirds of the broad-based advance is attributable to the index for final demand services less trade, transportation, and warehousing, which moved up 0.3 percent. Prices for final demand trade services rose 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand transportation and warehousing services increased 0.3 percent.


Special grouping, Final demand less foods, energy, and trade: Prices for final demand less foods, energy, and trade services rose 0.2 percent in June compared with no change in May and a 0.3-percent advance in April. (The index for final demand less foods, energy, and trade services represents about two-thirds of final demand.)


Special grouping, Finished goods: Prices for finished goods increased 0.7 percent in June after edging down 0.1 percent in the prior month. (The finished goods index represents about two-thirds of final demand goods, through the exclusion of the weight for government purchases and exports. The finished goods index represents about one-quarter of overall final demand.) Nearly three-quarters of this broad-based advance can be traced to prices for finished consumer energy goods, which jumped 2.3 percent.

It now remains to be seen if the recent decline in Brent prices flows through into energy costs in the coming summer months.

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101 years and counting's picture

BDI keeps dropping.  755 as of this AM.  the greater depression deppens.

1stepcloser's picture

That's the Gaia's Brown know u want to hit it...

GetZeeGold's picture



My local Dollar Store just got renamed the Dollar Plus Store......and my local Walmart now has a tie only dress code.

youngman's picture

Next thing you know is that WalMart will have a wine and cheese party ..with two buck Chuck...


msmith9962's picture

If that balloon knot has been dropping methane that's a problem. 

NYPoke's picture

Attack of the Mole People is at hand.

Squid Viscous's picture

and... futures up ten now, lol ... might as well get get your S&P 2000 hat before the mad rush

fonzannoon's picture

I've had this fucker laying around for months. Right next to my Nasdaq 5k hat. Taking longer than expected.

buzzsaw99's picture

i doubt anyone on this board seriously thought they would stop jamming it higher with the S7P this close to 2000.

fonzannoon's picture

Buzz how interesting is it (or not I guess) that Yellen focused on biotech etc being overvalued but never mentioned the utes/telecoms and other interest rate sensitive investments. You would figure if she wanted people to take her seriously about rasising rates eventually she would have sounded the alarm bells for them. Also if she wanted people out of bonds to free them up you may as well spook them out of bond like stocks....

TabakLover's picture

SP futes up 9.  BTFD buyers feeling like geniuses again.

asteroids's picture

Nah, they realised Old Yeller fucked up yesterday so they are ramping the market to make everyone feel good. Give it a couple of days and the market will puke.

MidwestJester's picture

I wouldn't be surprised to NEVER see the market puke all over itself. At least more than 100 points or so a day and definitely not for more than a day, maybe 2. It's going to the moon as we go down in flames, but no way they're going to let their canary die...

buzzsaw99's picture

don't fuck with TIPs is my advice. Lying bastidges.

LawsofPhysics's picture

7+ billion people (and growing), all competing for a better quality of life and the calories that make that possible.  Right now I don't see that demand going away anytime soon.

NoWayJose's picture

Actually gasoline prices are coming back down (post July 4th). Next month they will be able to pump out a lower number. Of course, this could indicate less demand for fuel.

yogibear's picture

A slow grind-down of consumption. The Federal Reserve is doing  a great job in distroying any wealth of the 80%. All replaced with debt.

Last of the Middle Class's picture

Anytime you hear the word "noise" in these reports, it basically means deal with it motherf*cker, we're going to continue printing to cover our banker asses and we couldn't give a shit that you pay more for everything in the way of inflation to pay for it.

yogibear's picture

Companies are raising prices and people are paying the higher prices regardless of what the Fed calls it, it's real inflation.

The real inflation is eating away at discretionary purchasing. The state and local governments are raising taxes and fees to pay for bloated public salaries and pensions. 


JustObserving's picture

As if US official statistics have any resemblance to reality:

Stock market participants might be in for a second quarter surprise. The result of many years of changes made to the official inflation measures is a substantially understated inflation rate. John Williams ( provides inflation estimates based on previous official methodology when the Consumer Price Index still represented the cost of a constant standard of living. The 1.26% inflation measure used to deflate first quarter nominal GDP is unrealistic, as Americans who make purchases are aware.

A reasonable correction to the understated deflator gives a much higher first quarter contraction. The two main causes of inflation’s understatement are the substitution principle introduced during the Clinton regime and the hedonic adjustments ongoing since the 1980s that redefine price rises as quality improvements. Correcting for excessive hedonic adjustments gives a first quarter real GDP contraction of 5%. Correcting for hedonic and substitution adjustments gives a first quarter real GDP contraction of 8.5%.

RiskyBidness's picture

Time to STFR yet??  I can't wait till we can!!  I'm so tired of Yellen lies.  They don't have a clue what they are doing.

El Hosel's picture

$40,000 car, $100 oil, $4 gas, $5 cigarette.... Low inflation

general ripper's picture

Sorry Janet.....noise is an imprecise term, lets see if we can better define decible levels

Dial tone - 80 Decible

Jackhammer - 95 dB

Pneumatic Riviter - 125dB

Jet Engine - 140dB

Shot Gun  - 165dB.

I don't know about you guys but I got us in there somewhere between jet engine and shot gun. Suggest ear protection for all without bullion.



sschu's picture

This is the kind of information that demonstrates the huge disconnect between the state and its subjects.  Anyone who has recently visiited the food store or gas station knows this to be propaganda.  Unfortunately they think these lies are still believed by many.

The corruption and lies run so deep that nothing less than a revolution will fix it.  


Colonel Klink's picture

Doing my part everyday NOT to consume anything, or as little as possible.  Collapse the whole corrupt corporate and political system.