Food and Energy Price Increases Keep PPI Inflation Elevated

Higher food and energy costs pushed the headline producer price index slightly higher than expected in April to +.7% MoM (consensus +.6%), but increases have slowed from the February and March pace of +1%+ growth. PPI held steady on an annual basis at +3.2% YoY (consensus +3.1%).

Excluding food and energy, core PPI inflation was unchanged in April, for the second month in a row. It has been a year and a half since core PPI has had two consecutive months without an increase. On an annual basis, PPI actually fell more than expected from a year earlier to +1.5% YoY (consensus +1.8%) from +1.7% YoY in March. The core figures indicate an easing of price increases for many goods.

The PPI report shows gasoline rising +8.2% MoM (+5.1% YoY). Energy prices rose at a trend like +3.4% MoM (3m ave +3.5% monthly gain, or almost 50% when annualized). Food prices moderated to rise +.4% MoM in April, but are up +7.7% YoY. The largest declines in prices in April were -1.8% MoM for computers(-22% YoY) and -1% MoM for passenger cars(-2.8% YoY). Auto prices have fallen in 5 of the last 7 months. Light trucks fell -.5% MoM.

Intermediate goods prices show steady, broadbased growth, rising +.9% MoM, and +3.7% YoY. The intermediate core index accelerated to +.8% MoM (+3.6% YoY) from +.2% MoM the prior three months, and showed the largest monthly gain in almost a year. Crude PPI prices fell -1.5%, but are up 11.1% YoY.

It is important to remember that PPI measures only domestically produced goods prices, and does not include services. So today's figure represents prices paid to factories, farmers, and other producers of goods.