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PPI-FD  
Released On 11/9/2018 8:30:00 AM For Oct, 2018
PriorConsensusConsensus RangeActual
PPI-FD - M/M change0.2 %0.2 %0.1 % to 0.4 %0.6 %
PPI-FD - Y/Y change2.6 %2.9 %
PPI-FD less food & energy - M/M change0.2 %0.2 %0.1 % to 0.3 %0.5 %
PPI-FD less food & energy - Y/Y change2.5 %2.6 %
PPI-FD less food, energy & trade services - M/M change0.4 %0.2 %0.1 % to 0.3 %0.2 %
PPI-FD less food, energy & trade services - Y/Y change2.9 %2.8 %

Highlights
There is unexpected life in October's producer price report, rising 0.6 percent overall and 0.5 percent excluding food and energy. Both of these results easily top Econoday's high forecasts with the overall gain the sharpest in six years and the ex-food & ex-energy the sharpest in nearly seven years. Much of this pressure is coming from trade services which track costs at wholesalers and retailers and which jumped 1.6 percent in October. Yet when excluding trade services as well as food and energy, the pressure eases to an as-expected 0.2 percent gain in the month.

Food rose 1.0 percent in October though the year-on-year rate remains in the negative column, at minus 0.7 percent. Energy showed substantial pressure in October, up 2.7 percent in the month for a yearly 12.5 percent in readings, however, that appear very likely to ease dramatically in the next report given the ongoing drop in oil. The outlook for trade services is uncertain with this yearly rate at only plus 1.5 percent following a run of up-and-down monthly results.

Consistent pressure hasn't been apparent in this report though some readings are showing life. Construction costs jumped 1.9 percent in October with this yearly rate at 4.7 percent and underscoring wide reports of shortages and tariff-related inflation in the sector. Finished goods rose 0.7 percent in the month with the yearly rate at 3.4 percent in what points to continuing pressure for consumer goods where finished prices rose 1.0 percent in the month for a yearly 3.9 percent. Finished services rose 0.6 percent for a moderate-to-strong 2.5 percent yearly rate.

Today's report is far from a game changer but it will likely inflate expectations for next week's reports on consumer prices and import & export prices. But the reversal underway in the price of oil, quickly moving from over $70 to under $60, looks to take a lot of steam out of November's inflation reports.

Consensus Outlook
A jump in transportation and shipping costs was the only wrinkle in what was otherwise a subdued producer price report for September with the consensus for October pointing to more of the same. Following September's 0.2 percent increase, another rise of 0.2 percent is expected for October producer prices. When excluding food and energy, prices are also expected to rise 0.2 percent as they are when excluding food, energy and trade services.

Definition
The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measures the average change over time in the prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. Effective with the January 2014 PPI data release in February 2014, BLS transitioned from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. The headline PPI (for Final Demand) measures price changes for goods, services, and construction sold to final demand: personal consumption, capital investment, government purchases, and exports.  Why Investors Care
 
[Chart]
Monthly changes in producer prices can be volatile and difficult to read, often the result of food and energy costs where large monthly swings are common. Excluding food and energy offers a smoother view.
Data Source: Haver Analytics
 
[Chart]
Year-on-year change, both overall and when excluding food and energy, offers a more accessible view of trends than month-to-month change.
Data Source: Haver Analytics
 
 

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