Apr PPI -0.7%, Core +0.1%, Show Gas Effect

The April producer price data were about as expected, showing moderation in inflation that reflected declining energy prices.

April PPI posted -0.7% in its biggest drop since February 2010, and core was up just 0.1% (+0.1082% unrounded). The over-the-year changes are now +0.6% overall and +1.7% core.

Core moderated after four months of +0.2% numbers. In core, pharmaceuticals at +0.6% (their biggest jump since January), +1.7% nonwood store fixtures and +0.2% communications added. These were offset by -0.1% light trucks and dips in some other industrial equipment categories.

Food prices fell 0.8% on drops in meats, fruits & vegetables and eggs; half the decline stemmed from vegetables.

Energy was down 2.5% and was the driver of the headline. All areas fell except +4.5% for residential natural gas. But 90% of the energy decline was due to gas posting -6% (-1.8% before adjustment, so exacerbated by the calculation).

Intermediate PPI posted -0.6% and crude -0.4%, suggesting no price problems are in train. Intermediate PPI also posted a string of declines in spring and summer 2012.
 

Overall, this was the moderate report that was expected. Declining overall PPI probably has no implications for consumer prices, since transportation and markups probably keep consumer prices steadier.

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