Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. He operates the blog MISH'S Global Economic Trend Analysis and believes in the Austrian School of economics.
The Producer Price Index (PPI) for final demand rose .2% in August vs an Econoday consensus expectation of 0.3%. Excluding food and energy, the PPI rose 0.1% vs an expectation of 0.2%.
Neither Hurricane Harvey nor Irma impacted the report. Next month, they will.
In a report not affected by Hurricane Harvey, producer prices once again couldn’t live up to expectations, edging 0.2 percent higher in August vs Econoday’s consensus for 0.3 percent. Also 1 tenth below expectations is the core (less food & energy) which could manage only a 0.1 percent gain. This is the third month in a row that the core has missed the consensus.
At 0.2 percent is the less food, energy & trade services reading where the gain relative to the core reflects yet another weak showing for trade services which is a closely watched component that hasn’t posted a gain since May. Service industries showing special weakness in August are hotel services and securities/investment services.
The lack of pressure comes despite a 3.3 percent monthly jump in energy costs that however does not reflect Hurricane Harvey as the shock, as explained by the Bureau of Labor Statistics, hit too late in the month to be picked up in the report. Even before Harvey, wholesale gasoline prices surged 9.5 percent in the month. Offsetting the rise in energy is a drop in food, down 1.3 percent and reflecting wide declines through components.
Though energy costs are a major wildcard right now, this report speaks to what is a persistent lack of price pressures in the economy, in this case at the base of the economy. Today’s report won’t be firming up confidence for tomorrow’s consumer price report where a rebound, like that expected for this report, is the call.
Goods Up 0.5%, Services Up 0.1%
The BLS breaks things down a bit finer.
The amazing thing about this report is the Econoday parrot did not moan about prices not rising enough.
Mike “Mish” Shedlock