PPI Inflation Acts Up in a Nasty Way:  It Spikes after Big Downward Revisions

Services knocked it out of the ballpark. Not helpful for the Fed-favored core PCE price index later in May, which includes some of those services.

By Wolf Richter for WOLF STREET.

The Producer Price Index, which is always whiplash-inducing volatile and subject to big revisions, misbehaved in a nasty way: it spiked in April from March. And March was revised sharply downward, which contributed to the month-to-month spike in April by lowering the base for the calculation.

The overall PPI for final demand spike by 6.4% annualized in April from March, seasonally adjusted, driven by a massive 7.0% spike – the worst in over a year – in services. The spike was made worse by the sharp downward revision into the negative of the March data, the base for today’s figure, according to the Bureau of Labor Statistics (blue).

On a three-month annualized basis, which includes the revisions and irons out the volatility, PPI increased by 4.1%, the worst since September (red).

Core PPI, which excludes energy costs, spiked by 6.1% annualized in April from March, seasonally adjusted, the biggest increase since July, also driven by the spike in services and made worse by the downward revision of the prior month.

The 3-month rate, at 3.2%, was the worst since September 2022, and just a hair worse than in March and February (seasonally adjusted).

Year-over-year, core PPI increased by 2.4%, the worst since August. We can now see how the month-to-month increases since late last year are beginning to push the year-over-year numbers higher, from the low point in December, to perform a U-Turn:

Services PPI – this is where the action has been – spike by 7.0% annualized in April from March, the worst since July, after the big down-revision in the prior month.

These are services that producers use. They weigh 62% in the overall PPI. And producers will try to pass those price increases on to their customers.

The 3-month rate accelerated by a hair to 3.4%, the worst since September (all seasonally adjusted).

Finished core goods PPI, which excludes energy costs, rose by 1.7% annualized in April from March, the first deceleration after three months of acceleration. These are core goods that producers buy, and whose costs become part of their input costs.

The three-month rate rose by 2.9%, a deceleration after three months of accelerations.

How this impacts the Fed-favored core PCE price index. The PCE Price Index (to be released later this month) is broader than the CPI (to be released tomorrow) and includes some of the PPI categories that CPI does not include, such as the hugely volatile PPI for “portfolio management,” which spiked by 58% annualized in April from March, and by 13.7% year-over-year.  So today’s PPI readings will not be helpful for the month-to-month core PCE and core services PCE numbers later this month that have been red hot so far this year.

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  82 comments for “PPI Inflation Acts Up in a Nasty Way:  It Spikes after Big Downward Revisions

  1. Sydney glover says:

    Wolf. You explain in your first paragraph, and yet the market is going ahead with bets on rate cuts. In your opinion, will this irrational behavior ever moderate after the latest PPI?

    • Wolf Richter says:

      Before I answer this, should I wait a few minutes until the S&P 500 is in the red?

        • joedidee says:

          sure hope Japan doesn’t sell to many Treasuries as they UNWIND Carry trades

      • Randy says:

        You gonna have to wait a little longer before you see red everything is going green. Guess you can’t call them all maybe tomorrow or the day after but we’re in inflated balloon territory it’s gonna take a lot of red to bring it back down to sanity levels.

        • Wolf Richter says:

          Everything is red now again. I didn’t have to wait that long — couple of hours since you posted your comment. And the market is closed now. So it’s not gonna change color for a while.

    • Brieuc says:

      It’s irrational only to the extent that the Fed is actually trying to fight inflation and doesn’t have other agendas. Dragging their feet to raise rates for 2 quarters before Powpow was renominated, and other actions since then makes me very uncertain that they have no other agendas than their official mandates.

      • joedidee says:

        I can tell you that services industry is always going to make $$ 1st
        don’t like price then WAIT FOR AC to get fixed or replaced
        every summer I find someone who gets taken badly by unscrupulous contractors
        I just got quote on new 5 ton – $6,500 installed
        the other 2 were each over $10k
        why?? 1st only does new units and charges flat $1,500 to install
        he did over 200 last year

    • RH says:

      The PPI of China is low and probably will plunge, which may lower costs of lots of materials in the cost of goods for US producers. In fact, China is plunging economically like a rollercoaster!

      Nomura estimated 20,000,000 in uncompleted, delayed, pre-sold homes in China! Per CNBC purchasers in China have waited for EIGHT years for so far, unfinished, PRE-PAID apartments. Demand there is sinking like the Titanic; wages are PLUNGING— PERMANENTLY.

      Any other country, which does not watch its citizens with such “diligence” would already have gotten a new government. That is Chinese, ev makers’ Achilles heel: their government’s coming Y1 TRILLION bond issuance will not be enough to keep their subsidies coming. RIP BYD. They should learn yoga, so in a few months, they can kiss themselves good bye.

  2. dishonest says:

    10 year treasuries seem to like the news. For now. Let’s see what happens this afternoon.

    • Clykke says:

      Did find this interesting. Seems to be a mix of last month’s downward revision and change in expectations for a slightly lower figure tomorrow. I guess we’ll see…

      • Wolf Richter says:

        Look at what happened in the meme stocks. None of this has anything to do with anything. It’s just sheer outright short-term gambling. It’s just a brainless frenzy.

    • Pea Sea says:

      Bond market expects this one to be ultimately revised downward as well, so it’s shrugging it off as noise.

  3. andy says:

    Wolf, do you have by any chance a chart that stacks up these price increases in services (let’s say from pre-pandemic prices to now). I think this is the time frame when prices blew up. Are we up 20-30%?
    I moved to a bigger apartment in SF during covid, and my rent actually went down. Just curious what others are feeling. Sorry if this is an ignorant question. Thank you.

    • Wolf Richter says:

      Rents in San Francisco went down in many buildings, or weren’t raised at renewal. I have heard lots of this. You’re not alone. There is a huge supply of rentals on the market. But that’s not the case in other cities, where big rent increases are happening, esp. in the middle of the country.

      In terms of rents, its the consumer inflation data that is relevant, not the PPI data, and we’ll talk about it tomorrow extensively when the CPI comes out.

  4. Debt-Free-Bubba says:

    Howdy Folks. Lone Wolf students are not surprised by this. CPI tomorrow

  5. John says:

    Thanks Wolf. Well I guess higher for longer. Not much on the longer duration yields. Certainly not 5.5% or higher.

  6. Tom V. says:

    Just looking at the various charts, it’s starting to appear to me like things are bouncing around in a range that’s fairly consistent with pre-COVID times. The question remains, will inflation remain bounded on the high end, or will it continue to leak upward? Unfortunately, I don’t have a time machine!

    • DeepDarkTruthfulMirror says:

      My thoughts exactly—if the high end of the pre-Covid range is the worst we see, I’ll be forced to give the Fed credit.

  7. Bear Hunter says:

    It seems all the rate cut mania comes from sources that profit from rate cuts and churn. Hard to find any objective information and thank you.

  8. JS says:

    I have many neighbors around me that are 65+. The amount of consternation and fear I hear from them is genuinely troubling. While some may say they were the prime beneficiaries of the bubbles that the Fed has blown, I just see awesome people that played by the rules, made the proper financial investments, and are now terrified of running out of money. We’ve already got one parent living with us. Before it’s over, we may have ‘em all.

    • Jon W says:

      I knew a few years after I graduated that asset markets were becoming Ponzi schemes. You had to have your head buried in the sand to not realise this. Where did people think all the ‘wealth’ was coming from when their house was making them more money than going to work?

      It was never going to work out and that generation knew there was a way that did work – what their parents did – but it required the hard work of building out infrastructure and the middle class rather than offshoring and free money. They repeatedly choose the easy money way. I hope my generation (millennials) can correct this but we are probably just as blinded by greed.

      • Matt B says:

        I see it a bit differently, where the bonuses that the post-war generations received were largely from indirect wealth transfers that can’t really be repeated. Things like the use of easily accessible nonrenewable resources (including abstract things like antibiotics and carbon sequestration), and on the current use of debt to support a mostly fictional asset market. You are essentially pulling resources from the past and the future, respectively, to pump up the “wealth” in the present. Another example would be infrastructure itself, where as some advocacy groups argue the post-war “suburban experiment” – the physical currency behind these fictional assets – is insolvent from the day it’s built, relying on government grants and exponential growth to fund itself – another wealth transfer from the future.

        I think the answers include a bunch of things that would be called “socialist”, as well as a re-evaluation of our ends and means and what we’re trying to accomplish with this incentive structure we call an economy.

    • Debt-Free-Bubba says:

      Howdy JS. I do not doubt your post. Majority of folks were duped and ZIRPed to stupidity. Some 65+ Lifelong squirrels are making more now than ever before. CASH is always KING to some of US.

      • Anthony A. says:

        Bubba….some of US over 65 are making “enough”, but maybe not more than before. Enough is what counts (along with no debt)!

      • JS says:

        Most of my neighbors have significant equity (their houses are worth 5-10x what they paid for them), but there’s something scary about seeing your bank balance go down month after month (and only accelerating). None of my neighbors will end up eating dog food (most have a NW I estimate of around $1-$2M), but when your house is more than half of that and the roof needs to be replaced ($40-$50K), you’re looking at the potential of needing care ($10k or more per month), and everything else is just getting more and more expensive, I would be freaked out as well. Seeing this has changed my plan of FIRE at 50, to probably never retiring. The moment you get out of the game, inflation really has the ability to quickly destroy your net worth. Provided your health holds up, you could be looking at a decade or two of retirement. I get it… first world problems.

        • Geriatric says:

          Retirement is not what you expect it to be. Nothing to do and all day to do it in is an understatement, unless you have a very enjoyable hobby that uses brain, hands and feet in an affordable way, preferable outdoors for most of the time. You are not the person at 65 that you were on your 21st birthday and in my experience people who work until they drop dead are happier than most, with few money worries. Shall I mention Warren Buffet?

  9. AV8R says:

    Spend Spend Spend.

    Print MOAR Money.

    No Landing!

  10. MM says:

    Inflation deniers gonna get rekt by CPI tomorrow

    • SoCalBeachDude says:

      Why would anyone care about so-called ‘inflation’ at all?

    • Biker says:

      But today stocks shoot up 🤔
      What they know we don’t?

      • The Real Tony says:

        A huge rally in the bond market as yields fall.

      • Home toad says:

        Biker, They know that Powell is on their side. His 5.50 just isn’t that impressive. And the hot ppi print is really just an annoyance.

        The pussy might be in the well, but the dow closing in on 40,000 is well worth the pussy climbing out to behold “Powells 40,000”. The yields are also declining on this Tues, late afternoon. Their is news that this ppi print could also be revised downward – also “big John stout” is on the way.

        Actually I just realized I have no idea what I’m talking about and never will.
        The funny thing is, Powell doesn’t have a clue either.

        I hope wolf isn’t prowling through the comment section.

      • Depth Charge says:

        “What they know we don’t?”

        That the FED’s secret definition of “higher for longer” (the quiet part they don’t say out loud) isn’t about rates, it’s about asset prices. The FED is interested in permanently higher asset prices for them and their wealthy buddies. “The FED put” appears to be alive and very healthy.

        • Bailouts4Billionaires says:

          Hit the nail on the head.

        • JNM says:

          100% correct. They are helping the 1% at the expense of the 98-99%. This wont end well whenever their jig will be up

    • Desert Rat says:

      God, I hope.

  11. grimp says:

    Best site on the web for accurate reporting on inflation.

  12. John says:

    Oil is down. For now, dollar a bit weaker, Powell doesn’t see rate hikes?!

  13. SoCalBeachDude says:

    MW: AMC completed sale $250 million of stock Monday after meme-stock rally

    • Wolf Richter says:

      This is going to be a case study for MBA students on how to rip off meme stock jockeys. Those meme-stock jockeys are ruthlessly being taken advantage of by AMC as it is selling hundreds of millions of dollars of shares into every spike, causing the spike to collapse. The dilution this is causing is just phenomenal. But it does allow for AMC to continue to fuel its cash-burn machine. And so it keeps going. I’m kind of liking it.

      • Depth Charge says:

        And it’s contributing to A LOT more inflation, as all speculative manias do.

      • MM says:

        I wonder how many tickets and overpriced sodas AMC didn’t have to sell because the AMC apes are essentially donating their money to the company.

  14. John says:

    Does Powell see the yield curve? Something has to change sometime. I can wait.

    • Bailouts4Billionaires says:

      I’ve been thinking about the yield curve inversion lately and think the story may be complicated this time around. The whole point is that the banks’ ability to make money is constrained bc they borrow on the short end and lend on the long end, so if the curve is inverted, they don’t make money and lend out less, and the overall economy contracts as a result. However, for the big banks they STILL aren’t paying much interest at all, just like a couple of bps, literally. So for the giant TBTF banks, THEIR yield curves are not inverted at all, and they’ll be just fine (thanks to the public TBTF subsidy) meanwhile for the regional banks that live in the real, non-subsidized world, they have been taking it in the shin.

  15. SoCalBeachDude says:

    MW: Boeing’s death spiral worsens as it received just seven orders for planes in April – with 33 orders canceled – as rival Airbus delivers almost twice as many planes so-far this year

    The company said on Tuesday that it received the unusually low number that wasn’t enough to offset canceled sales covering 33 planes.

    • JS says:

      If they weren’t primary beneficiaries of the military industrial complex, they’d be out of business.

  16. Depth Charge says:

    Just look at the speculative mania continuing on in all asset classes. Jerome Powell and Co. are one big clown show.

  17. Jackson Y says:

    Every time Powell opens his mouth the market shoots higher.

    Given the uncertainty, and the Federal Reserve’s history of being wrong on just about every major economic forecast, the most useful thing central bankers can do right now is to be humble, shut the hell up, minimize forward guidance, and let incoming data do the talking.

    Markets aren’t afraid of rates being held at these levels because they know it’s below the neutral rate. They’re only concerned about further tightening, which is why Powell keeps saying at every possible opportunity that more rate increases are unlikely. Plus, steady rates + growing corporate earnings = higher stock prices.

    • Matt S says:

      I wonder how much money these Fed members get paid for their seemingly regularly scheduled speeches they give sharing their supposed “intelligence”? Are they just getting a free airline ticket and expenses? Or do they charge a fee? Do they just like to hear themselves talk, or get all tingly when someone introduces them with lavish praise to an audience of attentive sheep? I can’t believe they are giving all these speeches just for fun. Are they networking for their next job? One fact is obvious = we have way too many economists in the world attending way too many conferences giving way too many speeches while providing very little value to the world. They do more damage than good.

      • Wolf Richter says:

        The members of the Federal Reserve Board of Governors — such as Powell — are government employees and cannot accept any payment for any speeches. The Fed pays their travel expenses. After they retire from the Fed, they can charge for their speeches.

        Communicating with the public about monetary policy, bank regulation, etc., is part of their official job, and that’s in part what their salary is for. Speeches and interviews are how they do it. They have to do it as part of their job. If they don’t feel like doing it, they’re not right for the job.

  18. John says:

    Eventually clown Powell and his circus will have two bad choices to make and that is cut or raise rates.so he does neither.

    • Depth Charge says:

      Fire bug Powell dropped a zephyr of gasoline on a raging speculative inferno then had a “wow, would you look at that!” expression on his face as if it was a shocking result. He then put on his fireman’s hat and pulled out his little squirt gun which has done nothing to extinguish the flames. Now he just mutters about things, doing nothing.

      • dang says:

        I think you are referring to the four, simultaneous asset price bubbles:

        Long Term Bonds
        Wealth Concentration

        I believe that the Chairman has answered your criticism by inaction.

        • Wolf Richter says:

          Housing is down to flat since June 2022. Nasdaq is just about flat since Nov 2021. Long-term bonds have plunged. CRE has crashed. But wealth is still concentrated.

    • dang says:

      I assure you that the honorable Jerome Powell is not a clown. The needle they are trying to thread is fraught with controvercy.

      Unwinding the economic structure that was put in place by the QE incentive is a decision as old as man.

      Whether too kick some ass, destroying goodwill in the process. Or do what they’re doing, standing pat, a policy decision that minimizes the losers.

  19. Bailouts4Billionaires says:

    Core PPI is up by 6.1% for the month, but I guess JPow is “hawkish” at 5.25-5.50% 🙄

  20. John says:

    I looked at cds Friday and Saturday. 3 month 5.3% at MidFirst Bank Oklahoma. Started out at about 4600 for 5/15/24 til 8/15/24. I bought a few, early Saturday morning. All 100’s were gone before noon.

    • ru82 says:

      I guess those CDs will be looking good when interest rates are back down to 3.5% and inflation is at 2ish. ;)

  21. SRK says:

    NASDAQ ATH. SP500 almost ATH.
    Markets were down in morning. AS Powell spoke, Markets went up.
    Wolf many not agree on this :). But Powell is sending Dovish messages even after 4 months of bad data.
    Yes he never promised anyone hikes in Dec meeting. He put the disclaimer IF inflation comes down etc. Fair enough. In May Meeting, he had chance to put hike on the table. He just mentioned hike unlikely and kind of brushed aside. He should know, its all about Messaging. He could expanded that Question. Nothing is ever off the table. The way he explained scenario “if there is unexpected weakness in labor market, they will cut aggressively”, why cant he say the same for hike too. If there is increase in inflation or slowing in meaningful progress, we will hike too.

    So many people in the Market are saying Financial conditions are loose. Even FED Kashkari is saying same in his latest interview to Bloomberg. Many places he is asking Businesses and they are telling him same.

    If FED monetary policy works through Financial Conditions, make sure Messaging is according to narrative you want to setup. OR at least don’t act like you are serious about bringing it on to 2%.

    • SRK says:

      I read Powell called today’s PPI data as Mixed and not hot. He also highlighted prior months revisions downwards. That may explain the Rally after he spoke.

    • Wolf Richter says:


      He is not sending dovish messages. You’re imagining them because you WANT him to send dovish messages. The market maniacs — and you — are fanaticizing instead of listening to him. It doesn’t matter what he says since you people are just making up whatever you want to hear. Look at GME and AMC, etc. And the entire AI hype. These are drunken idiots playing slots in a casino, not a rational crowd willing to listen.

      Learn the meaning of “if.”

      The PPI was “mixed” with the huge downward revision into the negative for the prior month. RTGDFA. At least read the headline before you make up BS.

      I’m getting tired of this BS here. Spread it on your toast and eat it.

  22. Citizen AllenM says:

    Stop looking at the Fed all the time. Interest rates are a backdrop, nothing more. And with QT money supply is a minus- and it will bite over time, especially in the third world. But everyone needs a boogie man, and this gives Wolf a ton of delicious posts that allow him to bonze the idiots. So the reality of a democratic win is starting to sink in,with higher taxes. And I hate to say it, but trade protection is positive for Wall Street.

    In short, this is a dumpster fire of an election. Everything is going to be a bit more expensive, and we get front row seats to the big show. Now, it will be quite a bit different if we get a big dem sweep, because SOCIALISM. LoL. We might just have a higher standard of living. Housing is going to be a stagnant mess, higher in some places with immigrant pressure, and higher in places of desire. As for the long boomer goodbye, well, it has started, and it will take a decade for the full slide to finally get here. I suspect it will end with a lot of boomer kids moving in with the last big homeowners to save the house from the costs of long term care.

    In short, stop expecting a crash, it will be a while, and these rates are not going to be effective, in fact, no where near as effective as a tax increase will be.

  23. dang says:

    The inflationary trend of the sedated data set, is clearly, up. For most people, inflation is one helluva lot higher than the puny numbers being reported.

    However, the relief that the working population feels with their higher income is one of, well relief.

    Which brings us to the most tantalizing question:

    Is the Federal Reserve Bank of the United States of America making a discernible mistake in their policy decisions concerning the obvious overheating of the prices charged by the economy as a political gesture, timing any notion to a return to the prices on last weeks menu.

  24. Desert Rat says:

    Wall street betting on rate cuts sooner again. Sees the PPI as not that bad. Corrupt financial system. I loathe everything about it.

    • MM says:

      Why not profit off their wrongness about rate cuts and take the other side of the trade?

      • Desert Rat says:

        Nope, disgusts me. Anyone who does that is part of the problem. I’m hoping the system implodes.

    • dang says:

      Wall Street is a shakedown racket with it’s own university system.

      The mob was just a moving part of the Wall Street mob.

      Just 15 years ago, for a short while, projected to be deceased until manna saved them.

  25. dang says:

    I agree that the Fed is a worthwhile entity, that is acting out a royal drama of financial rectitude that is more risky than it once was.

    While the Fed claims that financial conditions are restrictive, someone is funding the speculative reflation of the asset price bubbles that had deflated somewhat in 2021.

    The evidence indicates that Fed may not have the same anthem as the cannon fodder.

    • LT says:

      “…someone is funding the speculative reflation of the asset price bubbles that had deflated somewhat in 2021…”

      Tech bubble circle jerk. Easy money IS their “innovation” and it has to keep going to keep a host of fantasies alive. With woeful industrial policy – those fantasies are all they got. So to speack.

  26. dang says:

    I have decided to embrace stock ownership as an intelligent deployment of my meager resources. I am the very last bear to agree that valuation is not an accurate indication of the ultimate value of a given asset.

    I am about to purchase an S&P index fund with my money believing it only goes up never down since 2006, the awful years,

  27. dang says:

    Think about it, the likelihood that the present is representative of the future 30 years hence, offering a yield that insults the senses.

  28. John Stotes says:

    Wait, isn’t PPI the price that producers receive, not their input costs?

    “These are core goods that producers buy, and whose costs become part of their input costs.”

    • Wolf Richter says:

      It’s the input cost for the “final demand” producers of the PPI, and it’s the output price for producers further up in the PPI pipeline that sell to final demand producers. Final demand producers (such as an airline or a retailer) sell consumption goods and services to consumers, businesses, and governments.

  29. RH says:

    I forgot to add: Reuters reported that foreign car makers in China are “doomed” per an foreign, auto company insider. To much CCP protectionism and barriers!

    Also, it China took over the EU market, 13.8 million Europeans (minimum working in auto sector plus associated jobs) would lose their jobs like EU solar panel makers are now dying per CCP’s plan. CCP subsidies can out compete any US/EU business, so greedy, foolish German automakers in China will not be able stop the slow wave of oncoming EU tariffs on CCP auto makers, primarily electric cars and other products.

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