The PPI for final demand was a bit hotter than expected in July, led by services.
Producer prices for final demand have largely stabilized with services stronger than goods. Falling energy prices account for much of it.
Final Demand Services
- The index for final demand services increased 0.5 percent in July, the largest rise since moving up 0.5 percent in August 2022.
- Leading the broad-based advance in July, prices for final demand services less trade, transportation, and warehousing climbed 0.3 percent.
- Margins for final demand trade services rose 0.7 percent, and the index for final demand transportation and warehousing services moved up 0.5 percent.
- Forty percent of the July advance in the index for final demand services can be traced to a 7.6-percent rise in prices for portfolio management.
- Margins for food and alcohol retailing declined 2.5 percent. The indexes for application software publishing and for long-distance motor carrying also fell.
Final Demand Goods
- Prices for final demand goods edged up 0.1 percent in July after no change in June.
- Prices for final demand goods less foods and energy and for final demand energy were both unchanged.
- Within the index for final demand goods in July, prices for meats rose 5.0 percent. The indexes for gas fuels; hay, hayseeds, and oilseeds; utility natural gas; and motor vehicles also moved higher.
- Prices for diesel fuel dropped 7.1 percent. The indexes for gasoline, fresh fruits and melons, and plastic resins and materials also decreased.
Intermediate Demand
Processed Goods for Intermediate Demand
- The index for processed goods for intermediate demand fell 0.6 percent in July, the sixth consecutive decline. Leading the decrease in July, prices for processed materials less foods and energy moved down 0.7 percent.
- The index for processed energy goods fell 0.9 percent.
- Prices for processed foods and feeds advanced 1.4 percent.
- For the 12 months ended in July, the index for processed goods for intermediate demand dropped 7.8 percent.
- Over 60 percent of the July decline in prices for processed goods for intermediate demand can be traced to a 7.6-percent decrease in the index for steel mill products.
- Prices for diesel fuel; industrial chemicals; plastic resins and materials; electric power; and natural, processed, and imitation cheese also fell.
- The index for meats rose 5.0 percent. Prices for liquefied petroleum gas and for softwood lumber also advanced.
Unprocessed Goods for Intermediate Demand
- Prices for unprocessed goods for intermediate demand moved up 1.7 percent in July, the largest advance since jumping 4.8 percent in August 2022.
- The July increase can be traced to the index for unprocessed energy materials, which rose 8.0 percent.
- Prices for unprocessed nonfood materials less energy and for unprocessed foodstuffs and feedstuffs declined 3.1 percent and 0.9 percent, respectively.
- For the 12 months ended in July, the index for unprocessed goods for intermediate demand dropped 24.9 percent.
- Leading the advance in prices for unprocessed goods for intermediate demand, the index for crude petroleum rose 8.4 percent. Prices for natural gas; hay, hayseeds, and oilseeds; slaughter hogs; slaughter cattle; and carbon steel scrap also moved higher.
- The index for nonferrous metal ores fell 4.5 percent. Prices for corn and for slaughter poultry also decreased.
Services for Intermediate Demand
- The index for services for intermediate demand increased 0.5 percent in July after no change in June.
- Half of the broad-based rise can be traced to margins for trade services for intermediate demand, which moved up 1.3 percent.
- The indexes for services less trade, transportation, and warehousing for intermediate demand and for transportation and warehousing services for intermediate demand also advanced, climbing 0.3 percent and 0.4 percent, respectively.
- For the 12 months ended in July, prices for services for intermediate demand rose 4.6 percent, the largest 12-month increase since moving up 6.2 percent in February.
- Within the index for services for intermediate demand in July, margins for chemicals and allied products wholesaling advanced 2.4 percent. The indexes for portfolio management; securities brokerage, dealing, investment advice, and related services; courier, messenger, and U.S. postal services; accounting services (partial); and hardware, building material, and supplies retailing also moved higher.
- Prices for business loans (partial) decreased 1.5 percent. The indexes for fuels and lubricants retailing and for arrangement of freight and cargo transportation also fell.
PPI Final Demand Year-Over-Year Four Ways
Year-Over-Year PPI
- Final Demand: +0.8 percent, up from +0.1 percent
- Final Demand Services: 2.5 percent, up from +2.3 percent
- Final Demand Goods: -2.5 percent, up from -4.4 percent
- Final Demand Energy: -16.8 percent, up from -23.9 percent
Spotlight Energy
- The index for unprocessed energy materials rose 8.0 percent in July.
- The index for crude petroleum rose 8.4 percent in July.
- Prices for diesel fuel dropped 7.1 percent.
- Year-over-year final demand for energy was -16.8 percent, up from -23.9 percent.
With energy prices heading back up, this may be as good as it gets for a while.
But note the huge divergence between diesel and crude. Demand for shipping and trucking is plunging.
CPI Rises 0.2 Percent, Shelter Again Accounts for Most of the Increase
For the 18th straight month the price of shelter has risen at least 0.4 percent. For a year, analysts have predicted not just a slowing pace of increases, but falling prices.
For a look at the consumer side of things, please see CPI Rises 0.2 Percent, Shelter Again Accounts for Most of the Increase
With crude and gasoline prices rising, there will be a jump in the CPI in August unless the price of shelter declines.
China Exports and Imports Collapse, Harbinger of the Global Economy?
Also see China Exports and Imports Collapse, Harbinger of the Global Economy?
China’s exports are down 14.5 percent year-over-year, imports down 12.4 percent.
FedEx employees will average $170K per year at the end of a new contract. Other unions will soon want their piece of the unsustainable pie. In 5 years, new FedEx retirees will draw $100K per year or more from their pension fund, while contributing nothing to the company’s profits. The wage spiral in high gear. The result of Fed’s experiment to eliminate recessions by endless fiat.
There is an old delusional saying that debt could be inflated away. In a closed system it could be valid. In reality, new inflated debt is acquired faster than old obligations are devalued.
We are at peak boomers impairment on the standard American diet. It’s a global problem stretching from obese Mexico to China.
Instead of following Dr Fuhrman, Dr Esselstyn , Dr McDougal and Eileen Kopsaftis
exercises they trust Gen Z to fix them.
With so many starting to use weight loss meds, in a few years many Americans will be thin.
But still unfit.
I actually have heard a few analysts saying that US food consumption is expected to drop as much as 6% as a result and they are recommending getting out of snack food company stocks. Hard to imagine.
Happy to see that the price of imitation cheese fell.
Government agencies will be working diligently to show reduced inflation for July-September when the data is used to calculate the next year SS bump. After that, not so much.
Well I’m back from sailing the Mediterranean for the summer.
We are at peak 65 for boomers and we now have 12,000 hitting 65 everyday and this will continue all year and begin to taper a bit but that won’t help the labor participation situation. Less people working = less productivity = less supply. Demand will still be there, heck it will go up even higher with boomers getting free money via social security and nearly free healthcare from medicare/medicaid.
The article below says 4.4 million will hit 65 this year, who knows how many will become socialists at the social security office but it doesn’t matter because long term there will be 80 million by 2030. One out every five people in America will be asking the other 4 to work their butt off for them. I doubt things will go as people expect.
link to investors.com
So inflation won’t be going away and there won’t be a fed pivot unless we have redo of 2008 and banks start failing.
I don’t believe it will be four to one.
Three or even two to one is more like it.
My experience here in Los Angeles: Price increases were in a near panic last spring. New rental agreements were +20%; food items +50% in single jumps. That cooled off for about a year. Now the early signs of renewed inflation stress. Insurance, restaurant food, clothing…some items seeing big jumps all of a sudden again. All my friends and coworkers are grumbling again. Things here in LA are not at all consistent with falling inflation.
Energy prices are not falling. They are in accumulation, ready to Break Out.
Yep. Gas is up approx. $.30/gallon at the pumps here in central Florida. Looking at $3.79 – $3.89 per gallon at most stations. Lunch buffet special at a Chinese restaurant….$12….used to be $6.99. Many restaurants and sports bars are empty. Was in a 200 seat sports bar last week…..8 people dining…3 drinking at the bar. Not sure how the wait-staff makes ends meet. Have been seeing a plethora of print & email ads with coupons offering 30% off and other inducements for local restaurants.
Of course it has been hotter than Hades this week in Florida…worst spell I have ever felt in over 60 years. Electric and irrigation bills should be thru the roof for the month of August.
Nat gas fell from $9 to $2 in the last 18 months. Now back almost to $3.
Oil fell from $120 to $65. Now back to $83.
The inflation indexes typically compare to 12 months earlier. 12 months ago oil was still $90. 11 months ago $95. The indexes will continue to show a drop in energy until oil gets back to $90, or until another 3 months go by. Because oil has been $80 or lower since November 22.
“ Producer prices for final demand have largely stabilized with services stronger than goods. Falling energy prices account for much of it.”
Yep. Falling energy prices are an important factor in the last 6 months of various inflation indexes coming down. Thanks Joe Biden and the SPR releases.
However, what to do now that SPR releases have ended and OPEC wants $90 oil to make up for lost revenues.
World Oil demand hit a record 103 mbpd in June and is expected to exceed that in August. Meanwhile OPEC is throttling down production to ensure higher prices. Inventory levels have already dropped to an 8 month low worldwide and should reach an 8 year low by year end.
Got oil?
They need to eliminate oil from the statistics like they did for house prices. You can use wood or gas or garbage for energy just like you can substitue cat food for meat when meat goes up in price. Don’t worry inflation will come down that way all will be well.
You are missing the forest for the trees. You are worried about inflation and whether the various inflation indexes are accurate or not. That is a waste of time. Better to apply your time to improving your personal life. Health, wealth, family, friends. That is my focus, though the primary reason for my reading Mish’s excellent blog is to improve my wealth, and help others improve their wealth.
I do follow the natural resoure sector, oil in particular. You may want to check out the research firm in NY call Goehring and Rosenzweig. Spelling may be off a bit.
Thanks!
You can also substitute cats if you can catch ’em.
It definitely looks like SPR releases had an impact on prices, keeping them somewhat depressed. I’m not inclined to say thank you. That in turn led to substantial reductions in rig counts and of course the Saudi cuts. There were distortions in the oil market as a result of those releases that are likely going to come back to bite us now. We just shifted the pain and probably made it worse.
And certainly draining the reserves solely for selfish political reasons isn’t great for national security.
What are your oil picks PapaDave? I am still riding DVN for the dividends, selling calls when it goes up and buying them back cheap when it goes down. Making a killing….
I had OVV and it spiked so I sold it. Chevron looking ripe for the picking right now.
I follow quite a few analysts and frequently change things up based on their analysis. However, to keep it simple, just follow Eric Nuttall’s Ninepoint Energy fund top ten holdings.
ATH, BTE, CNQ, CVE, CPG, HWX, MEG, SGY, TVE. WCP
All oil. No nat gas in this list. CNQ and CVE the largest and safest. I own them all and about a dozen others.
For nat gas TOU.
In US I hold FANG and CHRD.