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Producer price inflation remains solidly under control in November

Every month, just before the BLS releases inflation numbers, they tease us with a new release of the Producer Price Index. Here it is for November:

The PPI for final demand fell slightly to 3.6%. (As usual, this is the month-over-month change converted to an annual rate of change.) The intermediate demand index came in at -8.3%.

The PPI measures prices received by domestic producers for their output. Intermediate demand is for goods and services sold as inputs to production. Final demand measures price changes for commodities sold to their final destination. In the same way that PPI for final demand is seen as sort of a prediction of future consumer inflation, PPI for intermediate demand is seen as a prediction of future final demand.

You can see this in the chart. PPI for intermediate demand peaked about a year ago and has been trending solidly downward ever since. PPI for final demand peaked several months later and is trending downward at a more modest rate.

If you ignore the expectations game, these are very nice numbers. They both suggest that CPI is likely to follow along, though monthly changes will, as usual, be volatile. We'll see on Tuesday, when CPI numbers are released.

UPDATE: For those of you interested in even more detail, here is PPI Final Demand broken down by goods and services:

Services are generally a little less volatile than goods, and the annualized inflation rate for services clocked in at 5.0% in November, higher than the previous two months. Inflation for goods dropped to 1.2% in November. In both cases, the trendline remains strongly downward.

3 thoughts on “Producer price inflation remains solidly under control in November

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  2. rick_jones

    If you ignore the expectations game, these are very nice numbers.

    But that’s the thing isn’t it. These results didn’t meet expectations. If Mary Todd had ignored the gunfire, I’m sure she would have truly enjoyed the play…

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