Producer Price Index (PPI)

The Producer Price Index for Final Demand (PPI FD) is yet another inflation indicator from the Federal Government, but instead of focusing on the consumer, it measures the average change over time in prices received by producers for domestically produced goods, services, and construction. In other words, PPI measures price changes from the perspective of the seller, whereas CPI measures changes from the perspective of the consumer.

PPI FD represents the final stage of production and is important for investors as it’s a reflection on company profit margins.

The latest Headline PPI FD for February came in at -0.1% month-over-month (MoM) and was up 4.6% year-over-year (YoY), both lower than consensus and a decline from January’s figures. Core PPI FD, which excludes food, energy, and trade services, increased 0.2% last month and 4.4% YoY. The declines in Headline PPI FD were led by prices for final demand goods, which fell 0.2% MoM.

If we dig into this morning’s report, we see that over 80% of the February decline in the index for final demand goods was due to a significant price drop in chicken eggs! Heating oil, home natural gas, and a few other index categories also fell. Index categories that increased were for gasoline and sugar and confectionary products. The index for final demand services also fell last month, and that was primarily the result of a YoY decrease in prices for machinery and vehicle wholesaling.