This is a massive amount of inflation that companies are passing on to each other through much of the economy.
By Wolf Richter for WOLF STREET.
The Producer Price Index final demand (PPI), which tracks inflation in prices that companies pay each other, spiked by 1.38% in April from March (+17.8% annualized), seasonally adjusted, the worst since the historic one-month spike in March 2022, driven by services and energy. It had already spiked by 8.7% annualized in March – and by 7.0% and 6.6% annualized in February and January before the energy price spike hit (blue in the chart).
Year-over-year, it spiked by 6.0%, the worst since December 2022, according to data from the Bureau of Labor Statistics today (red in the chart).
The shocker is the spike in services, and services dominate the PPI. The services PPI weighs 68% of the overall PPI, and it completely blew out – that was in addition to the spike in energy prices, and it also shows how some of the energy price increases have moved into other parts of the economy.
The services PPI spiked by 1.18% (+15.1% annualized) in April from March, seasonally adjusted.
Year-over-year, the services PPI jumped by 5.5%, the worst since November 2022. The low point, the point of the coolest recent services PPI inflation, was in December 2023 at 1.8%. The inflation rate has multiplied by more than three since then.
Within the services PPI:
- Trade services (weigh 19% in overall PPI) spiked a huge +2.7% month-to-month not annualized in April from March.
- Transportation & warehousing services (weigh 4.9% in overall PPI) exploded by 5.0% not annualized in April from March.
- But “other services” (weighs 38% in overall PPI) ticked up only +0.1%, after no change in the prior month.
This is really bad.
Core PPI Final Demand, which excludes energy and food components, spiked by 1.03% (+13.1% annualized) in April from March, seasonally adjusted.
This shows the massive impact of the blow-out of the services inflation in PPI, since the price spike of energy components is excluded from the core PPI.
Year-over-year, core PPI jumped by 5.2%, the worst since December 2022.
The PPI for energy prices spiked by 7.8% in April from March (+145% annualized), which came on top of the 10.1% spike in March.
This pushed the year-over-year increase to 22.4% in April.
The energy PPI performs such huge spikes and plunges that the year-over-year percentage changes blast through the top and bottom of the chart; so to gain some perspective, it’s helpful to look at the price level, rather than the percent change.
The chart shows the price level of the energy PPI. The big spikes in March and April pushed the price level to the highest since July 2022.
The PPI for core goods (goods without food and energy) jumped by 0.65% (+8.1% annualized).
This pushed the year-over-year increase to 4.6%, the worst since February 2023.
This is a massive amount of inflation in prices that companies pay each other and are trying to pass on to each other. And some of that will seep into consumer price inflation measures, such as the CPI and PCE price index.
The Fed has a real problem on its hands, and it has been boiling for months at the PPI level, and some of it already seeped into consumer price inflation, with the CPI jumping by 3.8% in April on core services and energy, but that jump didn’t yet include the dynamics working their way through the business sector in April.
In case you missed it: CPI Inflation Blows Past Fed Rates as Core Services, Gasoline, Electricity, and Food Spike. Fed’s “Real” Rates Are now Negative
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the mug to find out how:
I just replaced garage door. Supplier said that price goes up after May 1. It’s no surprise given the higher cost of fuel and everything else. inflation is a stubborn bitch, once started, won’t stop easily.
Bonds are up today. They have spoken.
Just a whisper, wait for much more…
In real estate it’s been an incredibly frustrating year. Lenders last minute backing out of funding purchases and refinances or increasing rates altogether. Owning property, we keep rents low and are seeing more people late on rent and households combining. This is certainly a tough year on the way to being really hard on all.
Apologies for posting unrelated quote from Babylon Bee. This just reminded me of Wolf’s RTGDA 😄
PATMOS — The Apostle John emerged from his cave earlier this week feeling confident that he couldn’t have been more clear in his description of the revelation he’d received.
“Perfect. Crystal clear,” John declared, setting aside his ink. “That should keep anyone from coming up with weird interpretations. If anything, I may have made things too obvious, perhaps spelled things out too much. It’s okay, though. It will make it more readable for kids.”
When asked by a scribe the exact identity of the beast with ten horns and seven heads, John sighed with impatience and said to just read what he wrote.
“It’s literally spelled out,” said John. “All you have to do is read it. I can’t make it simpler than that.”
At publishing time, John had added a few more clarifying verses about the giant burning mountain falling into the sea just to be doubly sure there could be no confusion.
Can’t blame any of this inflation on a virus folks.
This implies that “Trump Devotion Syndrome” has a bacterial origin…
The Straite of Hormuz is about to become a water cooler topic considering that approximately 25% of oil consumed globally passed through it before the war broke out.
Not to mention a significant portion of global fertilizer.
This is by every measure a horrendous setup for nearterm inflation. There’s no getting around it, sadly.
The FED should be doing an emergency 100 basis point RATE HIKE.
Volcker did a 250 basis point emergency rate hike when he took over the Fed in 1979. We need a similar rate hike now. Jimmy Carter is looking better every day.
‘The Fed has a real problem on its hands, and it has been boiling for months at the PPI level, and some of it already seeped into consumer price inflation, with the CPI jumping by 3.8% in April on core services and energy, but that jump didn’t yet include the dynamics working their way through the business sector in April.”
How much do you want to bet they’re going to pull out their “transitory” BS again? They probably won’t use the word, but they’re going to do the same exact thing. These scumbags won’t stop at anything to avoid doing their job. They go kicking and screaming to rate hikes, but cut rates in an instant. The fact that they never got inflation under control should be cause for investigations and imprisonment of FED officials for dereliction of duty.