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Producer Price Increase Lowest In 2014 As Energy Slides
PPI Final Demand was unchanged in August (+0.0% against expectations of +0.0%) making it lowest monthly gain since December 2013 (after revisions moved May's data). Across the board producer prices rose (or didn't) as expected with Final Demand YoY +1.8%. Energy prices fell 1.5% MoM and was the biggest driver of PPI's relative weakness but notably prices for finished goods fell 0.3% - the biggest drop since August 2013.
PPI Final Demand MoM lowest in a year
Another way of seeing the drop in wholesale prices:
Most of the August decrease can be traced to the index for finished consumer energy goods, which fell 1.4%.
Within finished goods, falling prices for gasoline, residential natural gas, eggs for fresh use, home heating oil, pork, and fresh vegetables (except potatoes) outweighed rising prices for pharmaceutical preparations, potatoes, and processed fruits and vegetables.
And from the report:
Final demand services: The final demand services index climbed 0.3 percent in August after inching up 0.1 percent in July. Eighty percent of the August advance can be traced to a 0.3-percent rise in prices for final demand services less trade, transportation, and warehousing. The index for final demand transportation and warehousing services also increased 0.3 percent. Margins for final demand trade services were unchanged. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Product detail: Accounting for over 20 percent of the August advance in the index for final demand services, prices for loan services (partial) increased 1.7 percent. The indexes for traveler accommodation services; health, beauty, and optical goods retailing; hospital outpatient care; securities brokerage, dealing, and investment advice; and airline passenger services also moved higher. In contrast, prices for services related to securities brokerage and dealing fell 4.5 percent in August. The indexes for food and alcohol retailing and for truck transportation of freight also decreased. (See table 4.)
Final demand goods: The index for final demand goods moved down 0.3 percent in August, the largest decrease since a 0.7-percent drop in April 2013. Over 80 percent of the August decline is attributable to prices for final demand energy, which fell 1.5 percent. The index for final demand foods decreased 0.5 percent. Prices for final demand goods less foods and energy were unchanged.
Product detail: Over a quarter of the decline in prices for final demand goods can be attributed to the gasoline index, which fell 1.4 percent. Prices for utility natural gas, chicken eggs, diesel fuel, electric power, and raw cotton also moved lower. Conversely, the index for potatoes surged 28.0 percent. Prices for pharmaceutical preparations and jet fuel also advanced.
Special grouping, Final demand less foods, energy, and trade: The index for final demand less foods, energy, and trade services advanced 0.2 percent in August, the third consecutive 0.2-percent increase. For the 12 months ended in August, prices for final demand less foods, energy, and trade services rose 1.8 percent. (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 fell 0.3 percent in August, the largest decrease since a 0.6-percent decline in April 2013. (The finished goods index represents about twothirds 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.) Most of the August decrease can be traced to the index for finished consumer energy goods, which fell 1.4 percent. Prices for finished consumer foods moved down 0.3 percent. In contrast, the index for finished goods less foods and energy edged up 0.1 percent. Within finished goods, falling prices for gasoline, residential natural gas, eggs for fresh use, home heating oil, pork, and fresh vegetables (except potatoes) outweighed rising prices for pharmaceutical preparations, potatoes, and processed fruits and vegetables
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Let me explain you how it works:
PROFIT = FINISHED PRODUCT PRICE - COST
PROFIT MUST BE > 0
Finished products prices are irrelevant in itself. We don't use crude oil, we used refined fuel.
We don't eat raw grains. We eat cereal
We don't use plastic resin. We used plastic products.
Business has to make a profit in order to convert raw materials into consumable/usable finished products
So, if COST inflation exceeds finished prices inflation, then business shut down or reduce employment.
Looking at finished product inflation is pure and simple propaganda.
Again, only thing that matters: PROFIT
But, but, but you said lower cost means more demand. I guess not so in deflation.
Demand is infinite.
Why no banana republic price inflation in the US yet ? Simply explained
http://freegoldobserver.blogspot.ca/2014_09_01_archive.html
Without real demand and using artificial demand, there is no real clear price picture.
Distortion reigns supreme and paralyzes the economy.
Anybody's gas getting cheaper? Mine hasn't. Just kinda flattish as oil's dropped by a sawbuck per barrel.
There is a sizable energy demand problem due to the depression. Money losing companies are subsidized by wall street to frack and work on shale, in a re-run of the nat gas fiasco of a few years ago. So they just keep on pumping. Not even the Mid east in flames is making oil rise. That should tell you something.
i was paying over $4 a gallon for 91 octane in the spring. My last fillup was in the low $3.70 range, so yeah, I'm paying less.
The Federal Reserve keeps printing and giving paper to China, India and elsewhere for real assets. Expect the reversal of the taper.
The taper is BS.
If you include Belgian purchases , there has been no taper at all
QE is disinflationry
QE will be deflationary (when asset bubble bursts)
So you are saying giving trillions to banks, while raising taxes, killing jobs with nonsensical healthcare regulation, and allowing insolvent banks to speculate instead of make loans for profit did nothing to stimulate demand? I am truly shocked that this complete shitshow did not result in an economic recovery.
Can't stop deflation forever Janet.
What the hell do lower prices matter when nobody has enough money to keep the electricity flowing in Los Angeles. Power outages again this week.
I don't suppose the outages have to do with a month of 110 dregree temperatures. :o(
A propos of energy demand...
Well, iff El-Badri isn't overly concerned, why should I be?
"Waiter, encore du champagne,"