The Producer Price Index (PPI) is a measure of the average price level for a fixed basket of capital and consumer goods received by producers. Why Investors Care
| Released on 7/17/07 For Jun 2007 | |||||||||||||||||||||||||
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Highlights
Overall producer prices in June edged down while the core PPI strengthened. The overall PPI fell 0.2 percent in June, following a 0.9 percent jump in May. June's increase was below the consensus forecast for a 0.1 percent rise. The core rate firmed in June to a 0.3 percent increase, following a 0.2 percent rise in May. The June figure was above the consensus forecast for a 0.2 percent rise in the core rate. Within the core, both capital goods and consumer goods excluding food and energy posted a 0.3 percent gain for the month.
The year-on-year rate for the overall PPI declined to up 3.2 percent in June from up 3.9 percent in May. The year-on-year core rate stood at 1.8 percent in June, up from 1.6 percent in May.
For the overall PPI, softness was in both energy and in food. By special groupings, energy slipped 1.1 percent in June, following a 4.1 percent jump in May. June's decline in energy was led by gasoline, down 3.9 percent, following a 10.2 percent increase in May. Home heating oil slipped 0.5 percent in June, following a 2.3 percent increase in May. However, residential gas jumped 2.6 percent in June, following a 0.9 percent rise the month before. Consumer food prices fell 0.8 percent in June, following a 0.2 percent decline in May.
Overall prices at the crude level of production rose 0.3 percent, following a 2.0 percent jump in May. Excluding food and energy, crude prices were soft, declining 0.2 percent after a 0.1 percent gain in May. Prices at the intermediate level increased 0.5 percent in June, following a 1.1 percent spike in May. Excluding food and energy, intermediate prices were somewhat strong in June with a 0.4 percent boost - the same as the month before.
Today's report reflects the volatility of the energy component but possibly a mild firming of the core number. Markets will likely hold back on any significant reaction until after tomorrow's CPI release and Fed Chairman Bernanke's testimony before Congress.
The producer price index continued to surge on higher energy costs as the overall PPI jumped 0.9 percent in May, following a 0.7 percent boost in April. The core rate was better behaved but still firmed in May to a 0.2 percent increase, following no change in both March and April. With crude oil prices continuing to rise in June, we should see continued upward pressure on the overall PPI.
PPI Consensus Forecast for June 07: +0.1 percent Range: -0.2 to +0.4 percent
PPI ex food & energy Consensus Forecast for June 07: +0.2 percent Range: +0.1 to +0.2 percent
![[Chart]](chart.gif)
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It is always a good idea to look at more than a few months of data to get a sense of changes in established trends. Monthly changes in the PPI are mainly volatile because of sharp fluctuations in food and energy prices. The core PPI eliminates the sharper fluctuations. |
![[Chart]](chart_1.gif)
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Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core PPI does not fluctuate as much as the total PPI. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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