What Rate Hike: Annual PPI Drops Most On Record Even As Gas Prices Rise In October

Just in case the latest retail sales miss (where every major spending category missed across the board) wasn't bad enough, moments ago the BLS also reported the October PPI, which also was a disaster if only for the Fed, with the headline print sliding even deeper into deflation at -1.6%, down from -1.1% in September, and missing expectations of -1.2%. 


PPI's excluding the volatile series also missed sharply:

  • PPI Ex food and energy up barely 0.1%, Exp. 0.5%, down from 0.8%
  • PPI Ex food, energy and trade up 0.4%, Exp. 0.5%, last 0.5%

But the real pain emerged on a year over year basis, where the headline drop was the worst decline in history!


Surprisingly this time it wasn't energy's fault, where prices were unchanged at 0.0% in the month, while gasoline prices actually rose 3.8 percent.

This time wholesale deflation was prevalent in most service other categories including apparel, jewelry, footwear, and accessories retailing; loan services; portfolio management; wireless telecommunication services; and health, beauty, and optical goods retailing also declined.

There was a modest rebound in prices for truck transportation of freight which rose 0.3 percent. The indexes for food retailing and deposit services (partial) also increased.

Among goods, over one-third of the October decline in the final demand goods index is attributable to prices for light motor trucks, which fell 1.8 percent. The indexes for chicken eggs, iron and steel scrap, beef and veal, boxed meat, and electric power also moved lower. The indexes for pharmaceutical preparations and corn also advanced.

furnishings, paper, plastics, health, beauty and major household appliances.

Worst of all, the index for final demand less foods, energy, and trade services edged down 0.1 percent in October

In other words, the Fed can no longer blame "transitory" energy prices for deflation.

And now, check to you Mr. Chairmanwoman and your December rate hike.