Wholesale inflation increased less than expected last month. Here is the latest news release from the Bureau of Labor Statistics.
The producer price index for final demand was up 0.2% month-over-month (s.a.), below the 0.4% forecast. On a non-seasonally adjusted annual basis, headline PPI accelerated from 3.0% in November to 3.3% in December, coming in below the expected 3.5% growth.
Core PPI (excluding food and energy) for final demand was flat in December, below the 0.3% forecast. On a non-seasonally adjusted annual basis, core PPI held steady at 3.5% year-over-year in December, coming in below the expected 3.8% growth.
Below is a chart of the historical series with a callout to the most recent 12 months. Wholesale inflation is currently at its highest level since February 2023.
Producer Price Index: Finished Goods
The BLS shifted its focus to its new "final demand" series in 2014. 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 December PPI for finished goods rose 1.0% month-over-month seasonally adjusted, up from 0.9% the previous month. On an annual basis, headline PPI for finished goods is currently at 2.7% year-over-year, up from last month's annual increase of 1.9% (seasonally adjusted). This is the highest level since March 2023
Core PPI for finished goods rose 0.2% month-over-month, unchanged from the previous month. On an annual basis, core PPI for finished goods is currently at 2.6% year-over-year, up from 2.5% the previous month (seasonally adjusted). This is the highest level since December 2023.
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 2020 recession producers were unable to pass along price increases, demonstrating the higher volatility of core PPI than core CPI. This relationship is further illustrated in the next chart.
For a closer look at the two main measures of inflation (CPI and PCE) and how they stack up against each other, check out the video below. Note: data is through January 2024.
More Exchange-Traded Products Topics >
