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 Rose 0.3% in October
Posted Under: Data Watch • Inflation • PPI

 

Implications:  Producer prices continued to rise in October, and are up at the fastest six-month annualized pace in nearly a decade at 4.7%, a sharp rebound from the steep price declines earlier this year.  Prices for both goods and services pushed the index higher, continuing the relatively broad-based movement in inflation over recent months.  Digging into the details shows that a key contributor to the October rise came from final demand goods, up 0.5%.  In particular, food prices had an outsized impact, as rising costs for vegetables, meat, and eggs pushed the food index up 2.4% on the month.   Energy prices rose 0.8% in October, led higher by rising costs for gasoline, which were partially offset by declining electricity prices.  Strip out the typically volatile food and energy categories, and "core" producer prices rose 0.1% in October.   Within core prices, transportation and warehousing were key movers in October, with long-distance motor carrying costs increasing 1.9% as a continued shortage of delivery drivers put upward price pressure on rates.  With the lumber shortage continuing, as well, the index for hardware, building materials, and supplies retailing also remains a standout, rising 7.3% in October and up at a staggering 174.5% annualized rate in the past three months.  Core producer prices are up a modest 1.1% over the past twelve months, but expect that to move higher in the months ahead.  Supply constraints, limitations on activity, and the general economic disruptions related to COVID-19 will continue to muddy the data for the foreseeable future, but what is clear is the massive increase in the M2 money supply, up 24.2% in the past year.  Once the dust finally settles – and it eventually will – we expect inflation to trend back to 2% and then higher.  The Federal Reserve is loose and, as it has made abundantly clear, plans to stay that way for the foreseeable future. Meanwhile, businesses operating at limited capacity will remain a headwind for economic activity.  The result will eventually be too much money chasing too few goods (and services), meaning higher – but not hyper – inflation.  Further down the pipeline, prices for intermediate demand processed goods rose 0.3% in October, while intermediate demand unprocessed goods rose 2.6%.  Both intermediate demand categories continue to show prices broadly lower compared to year-ago levels.  The data are starting to shift higher, though, tracking the emergence of the economy from what was a severe – but short – recession. We still have a long way to go to get back to where we were at the start of 2020, but the initial steps of recovery are under way, and we expect growth will march onward through the close of this year and beyond.

Click here  for PDF version

Posted on Friday, November 13, 2020 @ 2:46 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 professionals 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. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2020 All rights reserved.