Wholesale inflation accelerated last month to its highest level in a year. Here is the latest news release from the Bureau of Labor Statistics.
The producer price index for final demand increased 0.5% month-over-month (s.a.), more than the expected 0.3% growth. On a non-seasonally adjusted annual basis, this month's headline PPI accelerated from 1.8% in March to 2.2% in April, as expected. This is the highest level since April 2023.
Core PPI (excluding food and energy) for final demand rose 0.5% from last month, more than the expected 0.2% growth. On a non-seasonally adjusted annual basis, core PPI accelerated from 2.1% year-over-year in March to 2.4% in April, as expected. This is the highest level since August 2023.
Below is a chart of the historical series with a callout to the most recent 12 months.
Producer Price Index: Finished Goods
The BLS shifted its focus to its new "final demand" series in 2014, a shift I support. However, the data for these series are only constructed back to November 2009 for headline and April 2010 for core. Since our focus is on longer-term trends, we continue to track the legacy PPI for finished goods, which the BLS also includes in its monthly updates. We will see in a later overlay chart that the final demand and finished goods indexes are highly correlated.
The April PPI for finished goods was rose 0.4% month-over-month seasonally adjusted, up from last month's 0.0% growth. On an annual basis, headline PPI for finished goods is currently at 2.1% year-over-year, up from 1.9% last month (seasonally adjusted).
Core PPI for finished goods rose 0.1% month-over-month, down from 0.2% last month. On an annual basis, core PPI for finished goods is currently at 2.3% year-over-year, unchanged from last month (seasonally adjusted).
Producer Price Index (PPI) vs. Consumer Price Index (CPI)
Both PPI and CPI illustrate monthly price changes however, as their names suggest, the Producer Price Index measures price changes from the producer perspective whereas the Consumer Price Index measures price changes from the consumer perspective. PPI is thought to be a leading indicator of consumer inflation because, for the most part, when producers pay more for goods and services they are likely to pass along those higher costs to the consumer. With that being said, during the last recession producers were unable to pass along price increases, demonstrating the higher volatility of core PPI than core CPI.
The Fed has been in a tightening cycle to tackle high inflation, among other things. Inflation has eased over the last year but the threat of a resurgence hangs in the air and thus, the two big questions remain: "When will the Fed begin to cut rates?" and "Will there be a recession?".
For a closer look at the two main measures of inflation and how they stack up against each other, check out the video below. Note: data is through January 2024.
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