Six-month core PPI: +3.4%. Six-month services PPI: +3.7%. Year-over-year, both also accelerated further. But energy prices plunged.

By Wolf Richter for WOLF STREET.

The plunge in energy prices caused the Producer Price Index to inch up by just 0.05% in September from August – rounded to “unchanged” – and this was the material today for the (AI-generated?) headlines. But outside of energy, inflation at the producer level wasn’t benign at all, as several of the prior month-to-month changes were revised up substantially today. The six-month averages, which include the revisions, and the year-over-year increases, show that the whole scenario changed for the worse.

“Core” PPI rose 1.9% annualized in September from August (0.16% not annualized), seasonally adjusted, according to data from the Bureau of Labor Statistics today. But some of the prior months were revised up substantially. These month-to-month squiggles are indicated in blue.

So the 6-month Core PPI – which includes the revisions and irons out the month-to-month squiggles – accelerated to +3.4% in September. In terms of the up-revisions: August, as revised today, rose by 3.2%, up from the August reading a month ago of 2.8%. Note how the 6-month average shifted higher in 2024, after being well-behaved in much of 2023 near 2% (red).

Year-over-year, core PPI rose by 2.8%, the second month in a row of accelerations, showing a significant up-trend in all of 2024. In terms of the up-revisions: August, as revised today, rose by 2.6%, up from the reading a month ago of 2.4%.

The PPI tracks inflation in goods and services that companies buy and whose cost increases they ultimately try to pass on to their customers.

Services PPI rose by 2.0% annualized in September from August, and some of the prior months were revised up substantially (blue in the chart below).

So the 6-month average rose by 3.7% (annualized) in September. In terms of the up-revisions: August, as revised today, rose by 3.6%, up from the August reading a month ago of 3.0%!

It’s the big revisions in the services PPI that drove the revisions in the core PPI. And there is nothing benign about the trend in the services PPI.

Year-over-year, the services PPI accelerated to 3.1% in September. In terms of the revisions: August was revised up to an increase of 2.9%, from an increase of 2.6% reported a month ago.

“Finished core goods” PPI rose by 2.6% annualized in September from August. The 6-month average accelerated to 2.3%, but has been in that range for three months. And the revisions were insignificant.

At the core goods level, producer price inflation seems to be in the upper portion of the pre-pandemic range at this point.

As we have seen in the Consumer Price Index as well, there have been no major inflation pressures in core goods in over a year. Inflation has gotten very sticky in services. And core goods have been a big factor in holding overall inflation down.

The PPI for “finished core goods” includes finished goods that companies buy but excludes food and energy products.

Year-over-year, the finished core goods PPI accelerated to 2.4% in September, the highest since December 2023. Here too, we can see that core goods inflation is in the upper portion of the pre-pandemic range.

The overall PPI for final demand, driven down by the plunge in energy prices, inched up 0.6% annualized in September from August (+0.05% not annualized).

But the big up-revisions of the prior months caused the 6-month average to accelerate to an increase of 2.3%, despite the plunge in energy prices.

In terms of the revisions: August was revised up to an increase of 2.2%, from the increase reported a month ago of 1.9%.

Here too, and despite the plunge in energy prices, we can see that overall PPI started trending higher in 2023.

Year-over-year, overall PPI rose by 1.8%. The August increase was revised up to 1.9%, from the 1.8% increase reported a month ago.

Obviously, the massive plunge in energy prices, which started in mid-2022, will end when energy prices hit bottom somewhere. Energy prices cannot plunge forever. But this plunge in energy prices has papered over the very sticky and still vibrant inflation pressures in services, which is why we look at prices beyond energy.

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