September Producer Prices Dominated by Food and Energy

The report on wholesale inflation for the month of September is out and running a bit. The U.S. Labor Department said that the Producer Price Index (PPI) rose by 1.1% on the headline reading, but the core PPI, which strips out food and energy, was flat for the month. Dow Jones was calling for +0.8% on the headline and +0.2% on the core PPI reading. Bloomberg also had estimates from its pool of economists of +0.8% on the headline PPI and +0.2% on the core PPI reading.

On a year-over-year basis, the readings are a bit hot compared to the Federal Reserve’s 2% target, but they are down slightly from the prior month. Year-over-year, the headline PPI is up by 2.1%, but the core was up by 2.3%.

Obviously the headline data was dominated by drought prices for food and higher oil prices for much of the month. The good news is that some of this has abated (outside of California at any rate), and it generally takes several months of hot wholesale prices before Joe Public starts seeing the prices systematically passed down to the consumer price index.

JON C. OGG