Producer Prices Declined in September

The majority of the downward trend can be credited to a decline in prices for final demand goods, products used by the final user which do not need any more processing, which fell 1.2 percent.

The Labor Department says the producer price index, which measures price changes before they reach the consumer, dropped 0.5 per cent last month after being unchanged in August.

“This earlier strength remains sufficient to propel real consumer spending growth in the third quarter close to matching the 3.6% annualized increase recorded in second quarter”, he said.

Compared to a year ago, the PPI index was 1.1 percent lower, the eighth straight month the index was down on a 12-month basis. “Our forecast assumes a 25-basis point hike (0.25%) before the end of the year, though such is contingent on an easing in the financial market volatility that was a factor staying the Fed’s hand at the September policy meeting”.

Producer prices fell more than expected in September as inflation is simply nowhere to be found.

Over the last 12 months, overall producer prices have declined 1.1% and the year-on-year increase has remained in negative territory for the last eight months.

Excluding food and energy prices, the core producer price index still slid by 0.3% in September after rising by 0.3% in August. Goods fell 1.2% m/m, mainly as a result of energy (-5.9%) and food (-0.8%); core goods were flat. Companies raise or lower prices for a number of reasons. The CPI comes out Thursday and it’s also expected to fall in September.