October PPI Dips 0.2%; Core Rate Up 0.2%

WASHINGTON — October PPI was reported down 0.2%, and core rose 0.2% (0.1616% unrounded). These represent a minuscule 0.3% gain overall and a 1.4% increase in core over the year.

Not only are the PPI data further down the supply chain than the CPI, but they also follow a pattern similar to that in CPI. That is, falling gasoline prices (a 3.8% drop, or 5.6% before adjustment) depressed energy (down 1.5% as diesel fuel and natural gas prices also dipped) and cut the overall pace of prices.

Food posted a 0.8% increase as beef, breads, and soft drinks rose.

In core, cars at a 1.7% gain (3.8% before adjustment, but this included new models as quality change pricing exceeded normal at nearly 104% of the average price increase) were a main contributor to the gain. Light trucks posted a 0.1% decline as their quality changes represented merely 2.8% of the average price increase.

Also, malt beverages at a 0.7% rise and pharmaceuticals at a 0.3% gain (their best gain since July) boosted the total.

Intermediate and crude PPI both declined, so there are no signs of inflation in the pipeline.

Perhaps the only other conclusion from PPI is that there are not any big pressures on firms' margins from these costs. The new version PPI is running at a 1.4% increase year-to-date, a Bureau of Labor Statistics economist said, also a modest pace.

The October government shutdown delayed PPI data collection and processing, but the response rate for the survey was "within the normal range," BLS said.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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