PPI Shows Big Deflationary Pressure
The U.S. Labor Department has released its Producer Price Index (PPI) for the month of February. In short, deflation is here, at least at the producer and wholesale level.
The U.S. Labor Department has released its Producer Price Index (PPI) for the month of February. In short, deflation is here, at least at the producer and wholesale level.
Producer prices for final demand fell by a seasonally adjusted 0.5%. If you exclude the volatile food and energy numbers for a core-PPI, the reading was also down by 0.5%. Dow Jones and Bloomberg both were calling for a gain of 0.3% on the headline and a gain of 0.1% on the core-PPI reading.
One key to the declines in February was a 1.5% drop in trade services at the prices received level. If you include the trade services, then PPI would be roughly flat rather than negative.
The most obvious issue here is low gasoline and energy prices. Still, the readings in February were basically flat compared to January, after the gasoline index rose 1.5% sequentially.
Another drop in February was seen in food prices, down 1.6% from January’s levels.
It seems increasingly harder to imagine an imminent rate hike from the Federal Reserve when you consider the deflation side of the argument. The Fed needed oil prices to remain higher, but that just wasn’t in the cards.
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Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.
