–YOY Rates are +7.2% Overall PPI & +2.5% Core PPI as Tobacco +2.8% MOM
By Joseph Plocek
WASHINGTON (MNI) – The latest producer price data were a
disappointment but do not necessarily imply a pickup in consumer prices,
as demand has been slack.
July PPI printed +0.2% and core was +0.4% (+0.4499% unrounded, its
worst since +0.5% in Jan, and an eighth gain). These advances left
over-the-year PPI at +7.2% overall and +2.5% in core. Moreover, the
unrounded data show that core just missed printing a small digit higher.
Within the core, tobacco advanced +2.8% (accounts for 0.1 point of
the core gain), light trucks +1.0%, and pharmaceuticals +0.4%. All
contributed more than most categories to the core gain. Tobacco prices
are unlikely to fall ahead as more excise taxes are imposed and demand
remains strong, but the other areas could reverse.
Food posted +0.6% as Irish potatoes (+25.8% as the harvest was inn
the future), cheese, fruit, and meat prices rose. The overall gain in
food was the biggest since +3.5% in February.
Energy prices fell 0.6% as all areas declined, led by -2.8% in
gasoline. Residential natural gas printed -0.9%, its best drop since
-1.8% in January.
Intermediate PPI was +0.2% and crude -1.2%, so prices should
moderate ahead. Rubber, plastics and metals were still rising in price,
as was corn in crude materials.
However, overall the PPI data were far worse than expected and show
there are price pressures in selected areas where there are few
substitutes.
This was not a good report as core producer inflation is creeping
higher. Last year there was significant moderation in core in the last
five months of the year, but whether that pattern holds in 2011 is
anyone’s guess.
**Market News International Washington Bureau: (202)371-2121**
[TOPICS: MAUDS$,M$U$$$,MT$$$$,MAUDR$]