The BLS reports PPI for Final Demand is Unchanged in August. Services rise 0.1% and goods decline 0.4%.

Diving into the report we see services are up thanks to a hefty increase in Obamacare. Goods took a huge dip.

Final demand services: The index for final demand services edged up 0.1 percent in August following a 0.3-percent decline in July. The advance can be traced to prices for final demand services less trade, transportation, and warehousing, which increased 0.5 percent. In contrast, the index for final demand trade services fell 0.6 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services moved down 0.4 percent.

Product detail: Within the index for final demand services in August, prices for outpatient care (partial) advanced 0.5 percent. The indexes for apparel, jewelry, footwear, and accessories retailing; guestroom rental; portfolio management; and  residential real estate services (partial) also moved higher. Conversely, margins for machinery and  equipment wholesaling decreased 2.9 percent. The indexes for chemicals and allied products wholesaling, services related to securities brokerage and dealing, and airline passenger services also declined.

Final demand goods: The index for final demand  goods fell 0.4 percent in August, the same as in July. Eighty percent of the August decrease can be traced to a 1.6-percent drop in prices for final demand foods. Also contributing to the decline in the index for final demand goods, prices for final demand energy moved down 0.8 percent. In contrast, the index for final demand goods less foods and energy inched up 0.1 percent.

Product detail: Thirty percent of the August decrease in the index for final demand goods is attributable to a 3.6-percent drop in prices for meats. The indexes for gasoline, fresh and dry vegetables, jet fuel, chicken eggs, and diesel fuel also fell. Conversely, prices for pharmaceutical preparations increased 1.0 percent. The indexes for electric power and natural, processed, and imitation cheese also rose.

PPI What’s Rising, What’s Not

PPI Final Demand Year-Over Year and Month-Over-Month

Econoday Spin

The Econoday inflation-proponent robot was back in form on this report.

Highlights

Producer prices show only limited life in what is still a price-neutral economy. The PPI-FD was unchanged in August which is much better than the 0.4 percent decline in July. Energy prices were down in August excluding which and also food, prices inched 0.1 percent higher.

Final service prices rose 0.1 percent following the prior month’s 0.3 percent decline though trade services, which are closely watched as a core reading, fell 0.6 percent. Final goods prices fell 0.4 percent for a second straight month.

But there is progress in trends as year-on-year rates all improved noticeably. Total prices at the wholesale level are unchanged from a year ago with the ex-food and ex-gas reading moving into positive ground at plus 1.0 percent.

This report isn’t on fire to say the very least but it could hint at a marginally upward surprise for tomorrow’s CPI report but still isn’t enough to raise the odds much for a rate hike at next week’s FOMC.

Recent History

Producer prices did show pressure in both May and June but the gains proved isolated as prices fell sharply in July, down 0.4 percent overall and down 0.3 percent less food & energy. Goods prices, including for finished goods, were weak in July as were both service prices and final service prices which are a special concern.

Programmed Robots vs. Thinking Humans

The programmed robot at Econoday has a “special concern” that service prices might fall.

The average person on the street has a “special concern” about rising prices, and believes the Econoday robot belongs in the junk pile.

Mike “Mish” Shedlock