Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  The Producer Price Index (PPI) declined 0.3% in September
Posted Under: Data Watch • PPI

 

Implications:  Producer prices made a surprise move lower in September, as falling energy prices and declining margins to wholesalers pushed the index down 0.3%.  Energy prices dropped 2.5% in September, led lower by a 7.2% decline in gasoline prices.  Food prices, meanwhile, rose 0.3% on the month.  Strip out these typically volatile categories, and "core" prices also fell 0.3% in September, marking the largest single-month drop for core prices since early 2015. Declining margins to wholesalers, particularly machinery and vehicle wholesalers, led the drop in core prices in September, though most major categories moved lower.  It's important to note that, even with the multi-year large decline in September, "core" prices are up 2.0% in the past year, and have run at or above the Fed's 2% inflation target on a year-ago comparison basis for the past twenty-six months straight.  Consensus expectations for the "core" reading in Thursday's consumer price index (CPI) release is a rise of 0.2%, and if that holds, "core" consumer prices will be up 2.4% in the past year.  In other words, parsing the volatile month-to-month data from the trend, the Fed should consider if further rate cuts are really needed right now.  The data don't seem to justify it, but the Fed left data dependence behind back in July.  Goods prices led the producer price index lower in September, with energy costs the key culprit.  Services prices declined 0.2% in September, with falling wholesaler margins more than offsetting a 1.1% increase in the cost for hospital outpatient care. Further down the pipeline, prices for intermediate demand goods remains soft, while intermediate demand services prices continue to move higher.  The pouting pundits may take today's report and point to the decline as evidence that the Fed needs to move rates lower, but we think that's a mistake.  Core inflation remains in-line with targets, and a focus on a single-month's reading misses the forest for a tree. That said, the Fed seems bent on lowering rates, and we expect we will see one more rate cut before the year is out, most likely coming at the meeting later this month.  

Click here  for PDF version 

Posted on Tuesday, October 8, 2019 @ 12:09 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2019 All rights reserved.