Commentary Directory

US PPI was a bit hot in August, growing at the fastest rate since June 2022. Final demand PPI increased 0.7% MoM and 1.6% YoY, up from 0.8% YoY in July, and core PPI grew 0.3% MoM and 3.0% YoY, up from 2.9% YoY. The monthly growth of core PPI was the same as last month and both were the highest since February of this year. Energy PPI surged on the month, up 10.5% MoM with processed energy goods up 12.1% MoM and unprocessed energy goods up 5.4% MoM. Outside of energy, there are still signs of disinflation. Core goods PPI edged up only 0.1% MoM and core services PPI was up 0.3% MoM. Intermediate demand services PPI MoM growth was also low at 0.1% MoM and the annual rate slowed from 4.5% YoY to 4.3% YoY.

Just like the hot CPI monthly move in August, PPI surprised a bit on the headline number. Both boiled over thanks to jumps in energy commodity prices at the end of the summer. The PPI report is not like the ones we saw earlier this year where deflation was the theme across the board. Instead, in August there was a bit of stagnation in that those trends. Specifically core PPI growth ticked back up to 3.0% YoY, up 0.1 ppt, with a reversal in the trend of core commodity prices. The PPI for nonfood, non-energy unprocessed goods increased 0.8% MoM after three straight months of sharp deflation. At first glance, this looks like some upward price pressures coming down the pipeline. Of course, this is just one report, so we (and the Fed) would like to see this new short-term trend reversed in the next few updates.