But goods prices are relatively tame. Energy prices plunge.
By Wolf Richter for WOLF STREET.
As has been the case here before, the prior months’ data of the Producer Price Index were revised higher today, and on top of that came the accelerating price increases in October.
Energy prices continued to drop month-to-month, and food prices turned around and dropped month-to-month, and so that helped overall PPI, but it still accelerated to 2.4% year-over-year in October, compared to an increase of 1.9% in September. It was driven by the services PPI, which has been on an uptrend all year, and further accelerated to +3.5% year-over-year in October, compared to increases below 2% at the end of 2023. And it pushed the core PPI to an increase of +3.1% year-over-year, when it had been below 2% at the end of last year.
The PPI tracks inflation in goods and services that companies buy and whose cost increases they ultimately try to pass on to their customers.
The culprit is services. The PPI for final demand services accelerated to 3.2% month-to-month annualized in October. September was revised higher today to +2.3% annualized from the unrevised +2.0% reported a month ago, seasonally adjusted, according to data from the Bureau of Labor Statistics today. Prior months were revised higher as well.
This fits into the overall theme that inflation switched from goods to services in 2022, and has gotten sticky there, as we saw yesterday in the Consumer Price Index, where the services CPI increased by 4.3% annualized. Services are the majority of the economy and of the inflation indices.
Drivers of the month-to-month increase of the services PPI were portfolio management; machinery and vehicle wholesaling; airline passenger services; retailing of computer hardware, software, and supplies; outpatient care; cable and satellite subscriber services; transportation and warehousing services; and trade services.
Year-over-year, the services PPI accelerated to 3.5% in October. The September reading was revised higher to 3.3%, from 3.1% as reported a month ago. August was revised higher to 3.0% from 2.6% as originally reported two months ago, and then a month ago revised higher to 2.9%. These revisions in the services PPI are ratcheting the whole scale higher.
The freak drop in July in the chart below was caused by the month-to-month reading of July 2023 of +9.9% annualized falling out of the 12-month period, and being replaced by the -2.5% reading of July 2024.
“Finished core goods” PPI has been tame. Many goods prices have been falling. The PPI for “finished core goods” includes finished goods that companies buy but excludes food and energy products.
The core goods PPI rose by 1.5% annualized in October from September, down from 2.4% in September and from 3.7% in August.
Year-over-year, the finished core goods PPI was roughly stable at 2.4% in October (rounded to the second decimal, 2.44%, it was, the highest since December 2023). The index has been all year in the upper portion of the pre-pandemic range.
As we have seen in the CPI as well, there have been no major inflation pressures in core goods in over a year. Inflation has gotten sticky in services. And core goods have been a big factor – along with the plunge in energy prices – in holding overall inflation down.
“Core” PPI accelerated to 3.1% month-to-month annualized in October. September was revised higher to 2.1% (from 1.9% as reported a month ago).
Year-over-year, core PPI rose by 3.1%, and September was revised higher to 2.9% (from 2.8% reported a month earlier).
The overall PPI for final demand accelerated sharply to 2.4%, compared to 1.9% in September (revised from 1.8% as reported a month earlier).
The plunge in energy prices since mid-2022 has kept the index down in the normal pre-pandemic range and has papered over the inflationary forces in services. But energy prices cannot plunge forever.
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1:04 PM 11/14/2024
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Thanks SoCal.
You’ve just killed the election bounce.
😉 /S
Questimate, 2016 to 2026, suggests cumulative 10 yr ~40% inflation.
PS CPI excludes things like taxes, fees, and interest rate impacts.
MW: Powell says Fed doesn’t need to hurry to cut their interest rates
Trump’s term ain’t gonna be easy it seems
Back to beer and PIZZA! Warren just bought some Dominoes stock.
Quietly buy a stake, then disclose that you did, BOOM goes the stock. Then go on CNBC and hype the stock. BOOM goes the stock. Then sometime later, buy a little more and then disclose that, and BOOM goes the stock. Go on CNBC… Easiest money in the world. But YOU cannot do that.
It doesn’t always work though. Buffett tried to do that with BNSF, and it duly jumped a few times during the early phases of that hype cycle, but then spiraled down, and he started losing lots of money on his stake, so he then bought the whole thing. YOU cannot do that either.
Dominoes tastes like you backed up a garbage truck right into your mouth.
You know if people were really honest, MOST chain store restaurant food is tasteless and awful.
Slogan should be : Hyped Big, looks great..tastes like Garbage!
PPI inflation has been accelerating all year. CPI inflation, which tends to follow PPI, also seems to have turned back up.
When does the Fed realize that this is not “transitory”, and tighten up again to slow it back down?
Anecdotally, I have never seen less resistance to higher cash pay specialty physician emergency charges. Our county fair has one sized drink and it is $10. SOMEBODY is paying over 20% on credit card balances and we may need to step in with usury laws to prevent a hopeless future for our young Americans.
Beers are $18 at the Washington Philadelphia football game at NORTHWEST stadium tonight.
Do you at least get good beer for $18 or is it piss water?
20% APY is the price for being foolish enough to carry a balance on a credit card.
I wonder how much of a damper this will put on Trump’s economic policy plans; My guess is that the bond market is going to give him some headaches…
Hot take: services inflation won’t go away as long as workers keep getting raises.
People want prices to go down, but they don’t want their wages to go down with them.
I know people are getting raises and spending.
But I think if this is the case then why hole sales are so down. Why are not people buying homes hand over fist if they are loaded.
On the similar note, if everything is awesome, why did Trump had a big win as one of his key point was economy.
People aren’t buying homes because it’s cheaper to rent.
So they are renting and spending money on nonsense, not saving for a house, waiting for rates and prices to come down
ShortTLT,
Mass deportations and such which I don’t see likely, could easily drive up the cost of labor further. Election promises rarely turn into realities as what is the point?
Yeah, of course not. Why would they?
I’m not sure if there is any data on how much of every dollar spent has gone towards executive compensation versus folks working at lower rungs of the ladder. With the ever-rising executive compensations, I would hazard a guess that most of the recent price increases went towards the top guys lining their pockets even more. So why would the average guys accept lower wages especially since any recent increases probably helps them keep their head just above water.
Most of the executive compensation is in stock-based compensation, and that is NOT included in the income figures. So go back to the drawing board and come up with a new theory.
It would appear that the FED is going to try to tamp down Inflation via QT rather than higher interest rates. So far it isn’t working.
Inflation HAS come down a lot, as you can see from the charts. It’s just undead inflation. It keeps going at a lower but not low level, and it’s trying to rise from the coffin again.
Someone should make a Dracula movie out of that.
Fiscal policy (government spending up the wazoo) continues to work against the efforts of the Fed to lower inflation. Rate cuts probably should have waited a bit longer.
Maybe just maybe the Treasury should be buying the Fed fund rates only and get back to a free bond market with the invisible hand taking care of the yield curve.