Services knocked it out of the ballpark. Not helpful for the Fed-favored core PCE price index later in May, which includes some of those services.
By Wolf Richter for WOLF STREET.
The Producer Price Index, which is always whiplash-inducing volatile and subject to big revisions, misbehaved in a nasty way: it spiked in April from March. And March was revised sharply downward, which contributed to the month-to-month spike in April by lowering the base for the calculation.
The overall PPI for final demand spike by 6.4% annualized in April from March, seasonally adjusted, driven by a massive 7.0% spike – the worst in over a year – in services. The spike was made worse by the sharp downward revision into the negative of the March data, the base for today’s figure, according to the Bureau of Labor Statistics (blue).
On a three-month annualized basis, which includes the revisions and irons out the volatility, PPI increased by 4.1%, the worst since September (red).
Core PPI, which excludes energy costs, spiked by 6.1% annualized in April from March, seasonally adjusted, the biggest increase since July, also driven by the spike in services and made worse by the downward revision of the prior month.
The 3-month rate, at 3.2%, was the worst since September 2022, and just a hair worse than in March and February (seasonally adjusted).
Year-over-year, core PPI increased by 2.4%, the worst since August. We can now see how the month-to-month increases since late last year are beginning to push the year-over-year numbers higher, from the low point in December, to perform a U-Turn:
Services PPI – this is where the action has been – spike by 7.0% annualized in April from March, the worst since July, after the big down-revision in the prior month.
These are services that producers use. They weigh 62% in the overall PPI. And producers will try to pass those price increases on to their customers.
The 3-month rate accelerated by a hair to 3.4%, the worst since September (all seasonally adjusted).
Finished core goods PPI, which excludes energy costs, rose by 1.7% annualized in April from March, the first deceleration after three months of acceleration. These are core goods that producers buy, and whose costs become part of their input costs.
The three-month rate rose by 2.9%, a deceleration after three months of accelerations.
How this impacts the Fed-favored core PCE price index. The PCE Price Index (to be released later this month) is broader than the CPI (to be released tomorrow) and includes some of the PPI categories that CPI does not include, such as the hugely volatile PPI for “portfolio management,” which spiked by 58% annualized in April from March, and by 13.7% year-over-year. So today’s PPI readings will not be helpful for the month-to-month core PCE and core services PCE numbers later this month that have been red hot so far this year.
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