Economists expected a 0.1 percentage point rise in the PPI. The BLS reports 0.2 with May revised up by 0.2 percentage points. Services inflation is hot except trucking. 
Last month I reported The Producer Price Index Unexpectedly Declines in May
Strike that headline thought. This month the BLS Revised the PPI Higher.
PPI Final Demand Month Over Month
- Overall: 0.0 Percent
- Goods: -0.5 Percent
- Services: 0.6 Percent
- Food: -0.3 Percent
- Excluding Food and Energy: 0.4 Percent
Goods vs Services
- Goods: For the first six months of 2024, starting January, PPI Goods were -0.1, 1.1, -0.2, 0.3, -0.8, -0.5. That’s a slightly negative monthly average.
- Services: For the first six months of 2024, starting January, PPI Services were 0.6, 0.3, 0.0, 0.6, 0.3, and 0.6. That’s an average monthly of 0.4.
Final Demand Services
Prices for final demand services rose 0.6 percent in June after moving up 0.3 percent in May. Nearly all the June increase is attributable to a 1.9-percent jump in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.)
The index for final demand services less trade, transportation, and warehousing inched up 0.1 percent. Prices for final demand transportation and warehousing services fell 0.4 percent.
Over one-quarter of the June advance in prices for final demand services can be traced to a 3.7-percent rise in margins for machinery and vehicle wholesaling.
Prices for truck transportation of freight declined 1.2 percent. The indexes for residential real estate loans (partial) and for machinery and equipment parts and supplies wholesaling also decreased.
Final Demand Goods
Prices for final demand goods moved down 0.5 percent in June after falling 0.8 percent in May. Most of the June decrease is attributable to a 2.6-percent drop in the index for final demand energy. Prices for final demand foods declined 0.3 percent, while the index for final demand goods less foods and energy was unchanged.
Over 60 percent of the June decrease in the index for final demand goods can be traced to a 5.8-percent decline in prices for gasoline. The indexes for processed poultry, residential electric power, diesel fuel, jet fuel, and fresh and dry vegetables also moved lower. Conversely, prices for chicken eggs increased 55.4 percent. The indexes for residential natural gas and for aluminum base scrap also advanced.
PPI Final Demand Year-Over-Year
The year-over-year PPI for both goods and services has bottomed. Services are a disaster.
PPI Final Demand Services Y/Y and M/M
Year-Over Year Details
- Final Demand: +2.6 Percent
- Final Demand Goods: +1.0 Percent
- Final Demand Services: +3.5 Percent
- Final Demand Less Food and Energy: 3.0 Percent
- Final Demand Energy: -1.4 Percent
Services impacts the PPI more than goods. It’s the services number the Fed will pay attention to the most.
Very Bad Report
This report is very bad, if not terrible, for the Fed. The cost of services is rising which adds to overall inflation pressures.
Falling energy and trucking services strongly suggests (along with many other things) a slowing economy.
CPI Declines in June, Rent Finally Moderates, Food Away From Home Is a Problem
Yesterday, I reported CPI Declines in June, Rent Finally Moderates, Food Away From Home Is a Problem
The string of 33 consecutive months of rent rising 0.4 percent or more is finally broken.
That’s the good news. The bad news is the price of food away from home rose another 0.4 percent.
The seemingly good news is the price of gasoline fell 3.8 percent. But why is the price of gasoline falling? Here’s the answer:
Recession Has Begun
On July 8, I stated Weak Data Says a Recession Has Already Started, Let’s Now Discuss When
Weakness Everywhere
There is weakness in housing (new home sales, existing home sales, and starts at the lowest in 4 years), consumer spending, manufacturing (both durable and nondurable good), jobs data (constant negative revisions, QCEW, major survey discrepancies, quits, and a rising unemployment rate), and finally we have major unexpected ISM Services in Contraction.
All of the above items are hard data other than the services ISM.
There is no savior on the horizon this time. The Fed rates to be inactive until it panics in September and that will be much too late to stop a recession that started in May or June.
The recession will cool energy and rent is cooling on its own.
For more details and discussion as to why I think a recession has started, please see the above link.
There are 6 seasonal, endogenous, economic inflection points each year.
(they may vary a little from year to year):
Pivot ↓ #1 3rd week in Jan.
Pivot ↑ #2 mid Mar.
Pivot ↓ #3 May 5,
Pivot ↑ #4 mid Jun.
Pivot ↓ #5 July 21,
Pivot ↑ #6 2-3 week in Oct.
The sell signal is on July 21st.
Economists are stupid. All monetary savings originate in the payment’s system. The source of interest-bearing deposits is other bank deposits, directly or indirectly via the currency route (never more than a short-term situation), or through the banks undivided profits accounts. An increase in time deposits depletes demand deposits, dollar for dollar.
Saver-holders never transfer their savings outside of the payment’s system unless they hoard currency or convert to other national currencies, as anyone who has applied double-entry bookkeeping on a national scale should already know.
The principal ways to reduce the volume of bank deposits is for the saver-holder to use his funds for the payment of a bank loan, interest on a bank loan for the payment of a banks service, or for the purchase from their banks of any type of commercial bank security obligation, e.g., bank stocks, debentures, etc.
The downward pressure against inflation doesn’t happen until after July.
Contrary to Nobel Prize–winning economist Milton Friedman and Anna J. Schwartz’s “ A Monetary History of the United States, 1867–1960, “there is no “Fool in the Shower”. Monetary lags are not “long and variable”. The distributed lag effects for both real output and inflation have been mathematical constants for over 100 years
It’s just people getting lazier, the growth of labor unions, and monopoly price practices (which calls for a 2% inflation target)..
“growth of labor unions”
LULZ. what planet are you living on?
McAfee add just popped up again
As one generation keeps retiring that is Boomers, so goes the work ethic.
With each subsequent generation having been impacted by zero interest and negative interest rates, that easy money now yields its fruit. Takes two to do what one was expected to produce not a decade ago.
The Fed is not going to increase productivity by doing what it always does make life easy and offer a band aid for every boo boo.
Say what you want but many are the Boomers who started their working years under the rigor of Gold standard and having Bosses from the depression era and WW2.
This cushion which has protected the Fed from full impact of easy money now says, guess what it’s your problem now. I am going fishing and play with the Grand kids..
Yes cheap overseas labor from globalization also helped contain prices but not product durability. All that inferior landfill economy, planned obsolescence product has an expiring shelf life.
The Bill is now due and payable with the repo man starting up his truck.
It’s official. Deflation is here. Don’t believe your eyes, believe the MSM.
Msnbc.com is running a deflation story, cheering the supposed price drops on many items in the last year, including a 1.7% drop in coffee prices.
Problem is, coffee futures are up 26% in the last 2 months…
To add: CNN is running a nauseating ‘deflation’ story, complete with a champagne celebration. The writer claims this is the first time since the scamdemic that prices have fallen. WRONG. This is the 3rd time in the last year that the BLS has reported deflation, but nobody knows that because the press didn’t report it. Reality is going to bite when they announce the social security COLA this fall.
The CNN’s and MSNBC’s think they can fool enough to believe that “disinflation” is deflation.
So the price of eggs is now lower than they were in 2021 or 2022 ?
The prices are just not increasing at a greater rate like they were from 2021 to 2023.
I asked Santa for a 100% cola increase
Click : Tradingview.com : inflation. U co back to 1921.
What happened with gas prices in the last week? ALL of our gas stations had an increase of $.30+ a gallon.
Biden tapped into strategic petroleum reserve prior to 4th of July travel weekend to depress prices as another one of his political decisions. It is now past that major travel weekend and the petroleum reserve is not bottomless as it was designed as a safeguard in case of actual War. Not for the political whim of a dementia patient.
Close. Not the SPR. But the Northeast gasoline reserve, which was established in 2014 after Hurricane Sandy in 2012. It was supposed to act as a buffer to bolster gasoline supplies in the event of another major disruption. However it has never been used and many consider it unnecessary today. I believe it is being emptied and not sure it will be refilled.
Unlike oil, gasoline has a normal shelf life of just 6 months. Add stabilizer and you can extend the life to 3-5 years. This gas is 10 years old, and will need to be mixed (likely in a 1:3 ratio) with fresh gas to be usable.
The SPR was being slowly drawn down since 2015 by an act of congress, for two reasons. One was to help fund federal spending. The second reason was because the SPR was considered unnecessary since US oil production surged with the fracking revolution. It had already dropped from 700 mb to 540 mb over a 7 year period when Biden decided to tap another 180 mb in 2022. Which dropped it to 360 mb.
In the last year, almost 30 mb have been added back to the reserve, which is now more of a Strategic Political Reserve, because we no longer need it for security purposes. The technology of shale oil allows us to boost production much faster than in the past.
4-6 weeks ago, several of us here on this board were sharing anecdotal data RE: exploding MoM & YoY vendor/sub/service costs.
today’s PPI data should not surprise any of the regular readers here… we saw this coming… front-row seats.
I like this recession. I’m making a boat load of profits every week. Selectively selling some big winners and raising cash levels a bit. Let’s keep this recession going for another 4 years!
We aren’t in recession.
On Paper Only
Then I like this economic growth!
As always, I don’t care about the definition; and I don’t care who thinks they are right about their call; I care about taking advantage of the opportunities in front of me. Which I have been doing for decades now.
Strong growth, slow growth, recession. Who cares? Democrats or Republicans; who cares?
Focus on your health, wealth, family and friends. You’ll live a happier life.
Agree.
You are so awesome. Can I take a selfie with you?
Nope.
Inflation rate M/M : in June 2022 it used to be 9.1% now it flopped to 3%. The downtrend M/M cont.
QQQ [1D] and QQQ 1[W] ==> hot sh*t.
Economy down, inflation up. I’m old enough to remember the ’70s. History is rhyming with stagflation again.
If MMMFs growth declines, there will be (increases noninflationary velocity). The Great Inflation was due to the monetization of time deposits (which offset the impoundment of savings). C-19 was due to the reversal of time deposits (as Shadow Stats pointed out).
The roc in long-term money flows, the volume and velocity of money, is now subpar.
Economics is called the dismal science because banks don’t lend deposits. See Richard Werner
Prof. Werner brilliantly explains how the banking system and financial sector really work. – YouTube
Rising minimum wages are finally showing up in economic data. First as rising unemployment from weaker companies reducing staff, and then as higher producer index costs to cover the higher wages for remaining employees.
Powell: You need to stay ahead of inflation. RAISE RATES NOW!
I wonder if that is why the bond market has not shown any signs of believing that inflation is completely under control.
1 Year Treasury rate remains around 5%.
What will it take as far as get Treasury rates down ?
+5% unemployment rate ?
Personal Consumption Expenditure (PCE) averaging no more than 2.5% for 9 months ?
Since October 2023, PCE has remained below or at 3% for each monthly report.
One would reasonable think with PCE remaining below 3% that at least the yield curve would invert less, and the 1 Year Treasury would drop to 4%.
Interest is the price of credit. The price of money is the reciprocal of the price level.
What the FED needs to do is lower policy rates and drain reserves at the same time.
Waller, Williams, and Logan seem to agree. They “believe the Fed can keep unloading bonds even when officials cut interest rates at some future date.”
Service sector/labor inflation continues, onshoring, tariffs and enormous govt. deficits will counter any goods deflation. I expect little change in rates or inflation.Real life costs like housing is still going up more that the poliburo publishes. Also there will be a hit due to shipping costs tripling. That is yet to come through.
Car dealers safe parking lots are loaded as they were in Mar 2020. Dealers xrystal palaces are either completed, or almost completed. Used cars price plunged. RE sales stalled. Industrial construction of new factories skeletons are either completed, or almost completed. The Dow and AAPL made a new all time high, but MSFT, NVDA and AMZN dropped.
Regional banks buy o/n charge 7%. The higher the front end the lower their profit. If the DOW 1M flip in Aug JP might cut rates to preempt, before the CPI drop below the 2%. Too late !
You are only reading us headlines Michael.
If CPI stays flattish and PPI inflation continues, doesn’t that imply a compression of profit margins, especially for consumer-facing industries?
Excellent point as the producers are not passing the increased costs onto the consumers.
Maybe they producers are employing quality management and streamlined their operations and manufacturing.
As far as streamlining, I am reading more about layoffs such as with companies or employers like Intuit, CNN, etc.
When I think streamlining, I can’t help not to think of the Bob’s in the movie Office Space.
And I am hearing even in Panama City Beach from friends who work in the tourist and service industries how their employers are cutting back on hours, and expecting them to work harder with less staff.
Oil is up 6% in the past month. This is not reflected in todays report.
Thanks to Biden’s energy policies and also geopolitics.
Also as far as dollar strength, the Dollar Index (ticker: DXY) is at 104. It peaked last at 112 back around October 2022.
I have suspected that inflation’s return would involve services and/or wages as a result of US social decay as well as skyrocketing insurance.
Look at Medicaid budget this year and last year. It was and is more than the Pentagon and national security budget.
I wonder if that has to do with Biden’s open border, and also the direction of this country as far as more and more people are becoming poor, and/or they are just gaming or exploiting Biden’s welfare state.
And as far as social decay, I don’t want to tell you what I’ve seen as far as the younger generation and its HVAC technicians such as for furnaces, air conditioners, etc. I had one check a family member’s furnace, and was shocked that they don’t have the basic troubleshooting and logic skills to try to pinpoint the root cause for a failure.
When I was trained , I was told to explain to the client the rationale for my maintenance and repair such as what I observed as the symptoms and what are the possible root causes for the failure and how I was going to pinpoint the exact cause of failure, as well as how I was going to restore “or make whole” the system.
The younger generation just does not seem to want to engage in this type of paradigm or thinking, from my own anecdotal experiences.
This technician just wanted to change all the parts at once instead of figuring out which one of them was the failed parts.
I think generally speaking, not just in HVAC but across the board, many are waking up to the fact that it does not matter how much they learn or how hard they work- they aren’t going to get paid. Consider the meta game implications of a society like this- crashing productivity.
this is information technology era. you’re obsolete.
Core PPI was 0%, lower than expectations. Markets are soaring to 40th record high of the year. All is well.