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Wholesale Deflation Strikes US Economy: April PPI Has Biggest Annual Drop In 5 Years
Something funny happened on the way to the global reflation (telegraphed so loudly by the recent surge in 10Y yields to the highest level of 2015): PPI just crumbled by a sequential 0.4% in the month of April, despite expectations it would rise by 0.1% and continue the 0.2% monthly increase seen in March. This was a -1.3% drop in PPI - the fastest fall in 5 years.
Worse, the annual decline in final demand goods was -5.2% Y/Y, the biggest drop in the revised series in record!
According to the BLS, more than 70% of the decrease in prices can be attributed to a 0.7-percent decline in the index for final demand goods, which in turn was driven by a -2.9% drop in Energy prices reversing two months of non-negative prints.
However, the overall weakness was far more pronounced and as the table below shows, March PPI declined in virtually every category. In fact, core PPI excluding food and energy also dropped by -0.2%, on expectations of a 0.1% increase, which was also a 0.8% decline froma year ago, moving ever further from the Fed's 2.0% inflation bogey.
Follows the PPI slide breakdown by products and services:
Final demand goods: The index for final demand goods moved down 0.7 percent in April following a 0.3-percent rise in March. Leading the broad-based decline, prices for final demand energy fell 2.9 percent. The indexes for final demand foods and for final demand goods less foods and energy decreased 0.9 percent and 0.1 percent, respectively.
Product detail: Over 30 percent of the April decline in prices for final demand goods can be attributed to the index for gasoline, which decreased 4.7 percent. Prices for diesel fuel, jet fuel, utility natural gas, pork, and industrial chemicals also moved lower. In contrast, the index for pharmaceutical preparations advanced 0.5 percent. Prices for fresh and dry vegetables and for raw cotton also moved up.
Final demand services: The index for final demand services edged down 0.1 percent in April after inching up 0.1 percent in March. Leading the decrease, margins for final demand trade services fell 0.8 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand transportation and warehousing services declined 0.1 percent. Conversely, prices for final demand services less trade, transportation, and warehousing rose 0.2 percent.
Product detail: Over 40 percent of the April decrease in the index for final demand services can be traced to margins for machinery and equipment wholesaling, which declined 1.0 percent. The indexes for automotive fuels and lubricants retailing; health, beauty, and optical goods retailing; portfolio management; and food and alcohol retailing also moved lower. In contrast, prices for securities brokerage, dealing, investment advice, and related services climbed 4.0 percent. The indexes for food wholesaling, inpatient care, and passenger car rental also advanced.
And so as wholesale deflation rages, and countless other charts are screaming recession, we can't wait for the Fed to hike rates just so it can push the US back into recession and have the alibi to unleash QE4.
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Deflation a dagger ion the heart of . Gov
Where is all the 29.5 hr/wk job income?
Are they saving it or something?
Of course, Cramer just said that we are a nation of savers.
but right on time, CNBC ran a counterbalanacing story this AM about the sky high price of eggs....and how eggs are "in everything" and a bellweather.
the trim tabs are actively being tweaked by our central planners.
hatch that bitchezz
Where is Bernanke's helicopter now bitchez!!!! Here it is.....
https://www.youtube.com/watch?v=ipQCuq-qWgc
I think the elite are scared, they know that they got too greedy, the only choice they have is to lower cost or face an uprising...
(Which would mean massive massive financial losses for them, for sure)
There's deflation in "Made in China" Crap. For everything else, there's DEBT.
Lots of things have gone up in price despite a deflationary trend. I would argue that those price increases are the result market interference (government policy) or actual supply demand dynamics rather than an inflated money supply.
The conventional credit based money system cannot cope with deflation unless a massive amount of debt is written off. I don't see that happening anytime soon. The "unconventional" response to deflation from the financial authorities will ensure a devalued currency.
My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.jobs-review.com
Go away, bot!
"your mom goes to college"
Lmfao :D
One of the things I don't understand about the 'bad news is good news' meme is that if we all know that the Fed CAN'T raise rates, surely this is all priced in now?
And, if so, one would think(!) that bad news should MEAN bad news. Can the 'market' keep going up forever?
The last time the 'market' reacted in a way that I considered to be appropriate was on the 3rd of April on the NFP - bad data, stocks came off. But the US was on holiday and as soon as it opened on the Monday, stocks went straight up!
DavidC
...surely this is all priced in now?
i can assure you that full retard is not priced in, not yet anyway.
Dunno buzz.
Full retard is a pretty good description of real estate prices.
can we get some deflation in Washington and Wall Street!
Not the worse since Lehman though - just last 5 years. It's all good then.
"Hey Frank -- joo know what a Hasa is...?"
So wholesale deflation?
Does this translate to lower consumer prices or higher corporate profits? If they can keep selling at the higher margins while loaning us government money a low, low interest, it looks like we are all going to just keep winning.
https://www.youtube.com/watch?v=bg92QpjRcJk
I am waiting for the "PPI" [aka, Pee Pee Implants} to drop to an affordable level before I grab one of those. They're too expensive right now. The Pee pee Implnat prices are ... overinflated ... you might say right now.
Jobless claims have also collapsed. Why? Because we're headlong into a recovery that has seen the stock market almost triple.
If you didn't catch part of that action you need to have a hard look in the mirror, Zeroes.
Got two part time jobs and ya lose one, you got no claim.
You should look into the facts, Stoog-ing.
Why? Because we're headlong into a recovery
Being stoned on Koolaid is no way to go through life son.
They have collapsed because we are about 7 years into an ongoing depression. You will get low numbers there once that many people have been purged. True unemployment/underemployment is about 22%.
Look at the Labor Force Participation Rate Chart. http://data.bls.gov/timeseries/LNS11300000
It's the best reflection of the state of the US workforce. The stock market has little (no) correlation to the economic health of the average American family.
Awesomousity! "Good" weekly claims + bad PPI = Fed on the sidelines and a green light for more bubblicious, algo driven stock levitation. Just another day.....
faith, the final straw...
Looks like I'll have to dust off my "Dow 20,000" hat again.
Deflation=falling prices
-the only stuff selling is the essentials, and only at the minimal levels needed for survival.
Even Austrian adherents understand that deflation is much preferable to inflation. After all, it makes the currency in your pockets more valuable.
Raising rates will help the economy because it will funnel money into CapEx instead of buybacks.
That is so weird, I seem to be spending more money on the stuff I buy during deflation.
More people I know are unemployed, when the unemployment rate goes down.
Global warming, more antartic ice and colder temperatures. I guess the hockey stick graph was prophetic, the warmer it gets the more hockey everyone will be able to play.
easy answer... the world is upside down.
If it scares the Fed... I'm all for it...
baloney. i haven't seen the cost of anything go down.
Language!, young man.
Not the price going down, but the number of items SOLD times the price of the items. Monetary inflation meets economic deflation.
Where are the ZH inflationistas? Come on you guys! Everyone knows that the evil gummint is cooking the books. They even have mobile units changing the price signs at service stations, while the pumps are still charging $5 a gallon.
The gummint can borrow at near zero cost but is obsessed with cutting the deficit. Amtrak's Northeast corridor is crippled, but the Amtrak budget is being cut. The rail tunnels under the Hudson river are crumbling, but can't be replaced because gummint can't be trusted. Warren Buffet's exploding oil trains show us how much better the private sector is at running a railroad. Let's privatize Amtrak so that they can haul oil and passengers on the same trains. It's a win-win solution!
Deflation. What? you mean my money will have more buying power. This just won't do. What's that you say? The real value of the government's debt (not our responsiblity if you ask me since they decided against our will to go into such extreme debt) will increase exponentially and hopefully bring the whole house of cards crashing down into a heap of "what does it matter". THIS CANNOT STAND! ACTIVATE THE PRINTING PRESSES MR. YELLEN!
I've heard of more "on record" and "in history" declines in the last two months than I have in the past two years.
Is something big about to happen?
I need to present some of these deflation stats to my hooker.
Deflation?
Bernanke wrote a paper about making sure it doesn't happen here. Apparently, he is a poor writer.
I do the food shopping on a weekly basis, mostly at Sam's Club ( there is no Costco near me). There is NO food deflation, and gas is up 8.1% since 3/20/15. Eating out is almost unaffordable. Discretionary spending seems to be stalling. The PPI may be declining (I don't trust any .gov stat's) but it is not reflected in consumer prices.
All government information is suspect at best.
I recall going to a townhall meeting for Tom Cole about 3 years ago. The place was packed with seniors, and I was one of the very few people younger than 50. Almost all of the questions/statements revoved around staying out of the Syrian conflict. I was the only person to ask about the apparent 30% yoy inflation in food prices I'd kept track of. He disputed my findings...I had the receipts. He still disputed my findings LOL. He thought inflation was around 3-5%. HAHAHAHAHAHAHAHAHAHA. Fucking BLS.....
" Yes we can! "
Si' se puede...
And Gawd bless Mary Jo Kopechne...
Don't worry, the price of energy is climbing.
Gas prices spiking.
Does this mean the volume in my Keebler cracker boxes will keep going down.
They call it deflation, but what it IS is their increasing difficulty in whipping up enough 'froth' in the economy to skim their usual cut.
Gram get in there and print, print, print. No more cookies please get he presses going.
No surprise here that deflation is the culprit taking down the economy. That argument was won in this analysis long ago... Inflation vs. Deflation
http://www.globaldeflationnews.com/inflation-vs-deflation-part-1which-on...
"...the PPI "measures the average change over time in the selling prices received by domestic producers for their output."
Well Shipping Costs have come down... and with the Strong Dollar imports cost less.
"while deflation is indicative of an economic slow-down. Economists and policy makers work closely with central banks to coordinate optimal open market operations and monetary policy adjustments that promote a stable long-term rate of inflation."
- BLS data is Seasonally Adjusted, so is .4% Real??
- "In April, more than 70 percent of the decrease in final demand prices can be attributed to a 0.7 percent decline in the index for final demand goods. Prices for final demand services edged down 0.1 percent."
- "Within intermediate demand, prices for processed goods fell 1.1 percent, the index for unprocessed goods moved up 0.9 percent, and prices for services advanced 0.5 percent. (See tables B and C.)"
- "Product detail: Over 30 percent of the April decline in prices for final demand goods can be attributed to the index for gasoline, which decreased 4.7 percent. Prices for diesel fuel, jet fuel, utility natural gas, pork, and industrial chemicals also moved lower."
- "Product detail: Over 40 percent of the April decrease in the index for final demand services can be traced to margins for machinery and equipment wholesaling, which declined 1.0 percent. The indexes for automotive fuels and lubricants retailing; health, beauty, and optical goods retailing; portfolio management; and food and alcohol retailing also moved lower."
-
"PPI Transitions from Stage-of-Processing to Final Demand-Intermediate Demand Aggregation System
Effective with the January 2014 Producer Price Index (PPI) data release in February 2014, BLS transitioned from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. The FD-ID system more than doubles PPI coverage of the United States economy by supplementing existing goods coverage with services, government purchases, exports, and construction."