Across the board, Producer Prices printed hotter than expected. PPI ex food and energy rose 0.3% MoM - the biggest jump since November, however, Final Demand PPI YoY remains negative for the 7th month in a row.
According to the BLS, in July, the increase in the final demand index can be traced to prices for final demand services, which climbed 0.4 percent. In contrast, the index for final demand goods edged down 0.1 percent.
Most notably, however, over 40% of the July increase in the index for final demand services is attributable to prices for guestroom rental, which jumped 9.9%: is the Fed about the realize, with a 5 year delay, the epic rental bubble they have blown?
The bottom line - there is enough here for the doves and the hawks, though the headline data definitely gives The Fed ammo to hike in September.
Hotter than expected PPI ex food and energy MoM:
[4]
Final Demand YoY remains weak, driven by ongoing defaltion in energy prices:
[5]
With energy weighing down goods demand, and guestroom rental surging in services.
[6]
More details from the report:
Final demand services: The index for final demand services moved up 0.4 percent in July, the largest rise since a 0.6-percent increase in October 2014. In July, 60 percent of the broad-based advance can be traced to a 0.4-percent rise in the index for final demand services less trade, transportation, and warehousing. Margins for final demand trade services also climbed 0.4 percent, and the index for final demand transportation and warehousing services moved up 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Product detail: Over 40 percent of the July increase in the index for final demand services is attributable to prices for guestroom rental, which jumped 9.9 percent. The indexes for automotive fuels and lubricants retailing; health, beauty, and optical goods retailing; securities brokerage, dealing, investment advice, and related services; computer hardware, software, and supplies retailing; and transportation of passengers (partial) also moved higher. Conversely, margins for apparel, footwear, and accessories retailing declined 4.2 percent. The indexes for loan services (partial) and truck transportation of freight also fell. (See table 4.)
Final demand goods: The index for final demand goods edged down 0.1 percent in July after rising 0.7 percent in June. The decrease is mostly attributable to a 0.6-percent decline in prices for final demand energy. The index for final demand foods inched down 0.1 percent, and prices for final demand goods less foods and energy were unchanged.
Product detail: A major factor in the July decrease in prices for final demand goods was the index for residential natural gas, which declined 2.4 percent. Prices for chicken eggs, home heating oil, pork, and nonferrous metals also moved lower. In contrast, the index for gasoline advanced 1.5 percent. Prices for corn, motor vehicles, and basic organic chemicals also increased.
The USD strenghtened modestly in kneejerk response but it does not appear this will hold.
