PPI Slides, Misses Estimates, After Finished Goods Prices Tumble Most Since July 2009

Final Demand Producer Prices fell 0.2% in November, more than the expected 0.1% drop, for the largest wholesale deflation since October 2011. This leads to a 1.4% YoY PPI, the weakest since March and has fallen for 7 straight months. The driver - unsurprisingly - Energy prices fell 3.1% MoM (5th monthly drop in a row) with fuels & lubricants plunging 7.7% MoM and there is more good news - alcohol fell 0.1% YoY for the 2nd month. Beef/Veal prices continue to surge (+28.6% YoY). Core PPI was unchanged on the month, also missing expectations. Prices for finished goods moved down 0.7 percent in November, the largest decrease since a 1.2-percent drop in July 2009, while prices for finished goods ex-food and energy were down -0.1% for the second consecutive month: the longest negative stretch in years.

Biggest deflation since Oct 2011:

 

Finished goods:

The breakdown:

 

And some more details from the report:

The index for final demand goods fell 0.7 percent in November, the fifth consecutive decrease. The broad-based November decline was led by prices for final  demand energy, which dropped 3.1 percent. The index for final demand goods less foods and energy edged down 0.1 percent, and prices for final demand foods fell 0.2 percent.

Product detail: Sixty percent of the November decline in prices for final demand goods can be attributed to the index for gasoline, which dropped 6.3 percent. Prices for dairy products, pork, diesel fuel, residential natural gas, and primary basic organic chemicals also moved lower. Conversely, the index for pharmaceutical preparations increased 1.1 percent. Prices for fresh and dry vegetables and for soybeans also advanced.

...

The index for final demand services inched up 0.1 percent in November subsequent to a 0.5-percent rise in October. In November, prices for final demand services less trade, transportation, and warehousing, as well as margins for final demand trade services, rose 0.1 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) In contrast, the index for final demand transportation and warehousing services dropped 0.8 percent.

In November, a 4.0-percent jump in prices for loan services (partial) led the increase in the index for final demand services. Margins for machinery and equipment wholesaling, food wholesaling, and food and alcohol retailing, as well as prices for bundled wired telecommunications access services, also moved higher. Conversely, prices for airline passenger services moved down 1.9 percent. The indexes for automotive fuels and lubricants retailing; apparel, jewelry, footwear, and accessories retailing; and securities brokerage, dealing, and investment advice also decreased.

...

Prices for finished goods moved down 0.7 percent in November, the largest decrease since a 1.2-percent drop in July 2009. (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.) The November decline was led by the index for finished consumer energy goods, which dropped 2.7 percent. The index for finished consumer foods fell 0.5 percent. In contrast, prices for finished goods less foods and energy edged up 0.1 percent. Within finished goods, falling prices for gasoline, dairy products, pork, residential natural gas, light motor trucks, and fresh fruits and melons outweighed rising prices for pharmaceutical  preparations, fresh and dry vegetables, and beef and veal.