PPI Synopsis
- Stage 1: 20.79%
- Stage 2: 28.05%
- Stage 3 20.60%
- Stage 4 12.87
- PPI Final: 9.62%
- CPI: 6.81%
At the intermediate stages, producer prices are rising much faster than PPI for final demand. In turn, the PPI is rising much faster than the CPI.
What does that say about future passthrough? Lets’ hone in for another look.
PPI Final Demand, Intermediate Demand, CPI YOY Detail
No Leading Indicators
There does not seem to be any clear leading indicators. In April of 2020 the PPI at all stages bottomed before the CPI but only by a month and with no other instances.
The period from June 2021 to September 2021 is interesting in that the CPI declined slightly while PPI for final demand jumped and the intermediate levels were mixed.
Overall, the intermediate stages are more volatile in both directions than the PPI for final demand which in turn is more volatile than the CPI.
Same Direction, Different Amplitudes
Mostly, these measures all move in sync with no predictive value.
I often hear people saying things like “It’s only a matter of time before there is a passthrough from intermediate to the CPI” but there is no discernable CPI lag other than a random month here or there.
The prices tend to move together albeit with far different amplitudes.
PPI Notes
The final demand portion of the FD-ID system measures price changes from the producer perspective for commodities sold as personal consumption, capital investment, to government, and as exports. The system is composed of six main price indexes: final demand goods; final demand trade services; final demand transportation and warehousing services; final demand services excluding trade, transportation, and warehousing; final demand construction; and overall final demand.
The intermediate demand portion of the FD-ID system tracks price changes from a producer perspective for goods, services, and construction products sold to businesses as inputs to production, excluding capital investment. The system includes two parallel treatments of intermediate demand. The first treatment organizes intermediate demand commodities by type and is composed of six main price indexes: unprocessed goods for intermediate demand; processed goods for intermediate demand; intermediate demand trade services; intermediate demand transportation and warehousing services; intermediate demand services less trade, transportation, and warehousing; and intermediate demand construction. The second treatment organizes intermediate demand commodities into production stages, with the explicit goal of developing a forward-flow model of production and price change.
These indexes can be used to study price transmission across stages of production and final demand. This system is constructed in a manner that maximizes forward flow of production between stages, while minimizing back-flow of production. The production flow treatment contains four main indexes: intermediate demand stage 1, intermediate demand stage 2, intermediate demand stage 3, and intermediate demand stage 4.
PPI Components
Just for gins I took a deep dive into PPI Components. There are tens of thousands of them, and also replicated in multiple ways. For example there are different numbers by stage.
The Excel tables are enormous, and there are lots of them. I condensed one of the tables with over 5,500 lines to smaller number of items using the BLS’s primary categories.
PPI Percentage Weights Unprocessed Goods Intermediate
Somehow processed foods and feeds is a category of unprocessed goods.
PPI Percentage Weights Processed Goods Intermediate
PPI Percentage Weights Services Intermediate
The bottom 15 BLS Services are all under one percentage point in weight
As an example of the captured detail, please note the weight of “Great Lakes-St Lawrence Seaway Water Transportation of Freight” is 0.013% of the services PPI.
Real estate services are over 7% of the services PPI, portfolio management is 2.8%, commissions from sales of insurance is 3.3%, and investment banking adds 1.4% to the PPI.
Question of the Day
How much time, energy, cost, and people are involved in capturing and quantifying this data?
Thanks for Tuning In!
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Aurora Innovation Inc., a Pittsburgh-headquartered self-driving
tech startup that offers products including an autonomous trucking
service, says it is exploring the integration of its trucking technology
into Uber Freight’s brokerage network.
Aurora — which has offices in has offices in the San Francisco Bay
Area; Dallas; Seattle; Bozeman, Mont.; Louisville, Colo.; and Wixom,
Mich. — announced the move Wednesday.
Already, as part of a multistage commercial pilot, Aurora’s Horizon
trucking products are autonomously hauling cargo between Dallas and
Houston for Uber Freight customers, a company
spokesman said.”
https://www.post-gazette.com/business/tech-news/2021/12/16/Aurora-technology-trucking-Horizon-freight-Uber-Freight-highways-autonomous-commercial-Pittsburgh-robotics/stories/202112150163
Cutting wages seems a long way off to me at the moment. Massive staff shortages everywhere and getting much worse because everyone’s getting Omicron at the same time. They’ve just appealed for retired teachers to come back to work to help over here. Hospitals are filling up and health workers are getting ill. So even if it’s a milder virus it’s effects are considerable. They reckon one person is spreading it to 3/4.