The U.S. Labor Department released its Producer Price Index (PPI) for final demand for the month of June on Wednesday morning. We were worried that wholesale inflation would be stronger than what the economists were modeling for, and the good news is that the PPI was only marginally higher than expected.
Source: Thinkstock
The headline PPI for final demand in June was up by 0.4%. Dow Jones and Bloomberg were both calling for the headline PPI to be up by 0.3% in June. This was up from -0.2% in May, which was left static in the revision. The core PPI, excluding food and energy, was up by 0.2% in June. Dow Jones and Bloomberg were both calling for the core PPI to be up by 0.2%, after a -0.1% drop in May.
As previously noted, investors use the PPI as a precursor of consumer prices because rising costs of production can bring higher prices at the consumer level. It is a chain that is obvious, but there are frequently some exceptions.
The new PPI calculation has also been changed to measure the PPI for final demand. This change in how the data are presented still has many investors and traders a bit confused around the release, but eventually data are just data.
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