URGENT: US Producer Price Index 0.2% up in October

The US Producer Price Index (PPI), which measures average price changes seen by producers and manufacturers, increased 0.2 per cent in October on a seasonally adjusted basis, according to Bureau of Labour Statistics data released Thursday.

This follows smaller gains of 0.1 per cent in September and 0.2 per cent in August. Over the 12 months ending in October, the unadjusted index for final demand rose by 2.4 per cent.

The rise in the PPI was largely driven by a 0.3 per cent increase in the index for final demand services. This category, which includes essential services such as transportation and warehousing, experienced broad-based gains. Notably, prices for services excluding trade, transportation, and warehousing advanced by 0.3 per cent. Transportation and warehousing services increased by 0.5 per cent, while trade services saw a modest rise of 0.1 per cent.

A significant contributor to the uptick in service prices was a 3.6 per cent increase in portfolio management fees. Other areas showing price growth included machinery and vehicle wholesaling, airline passenger services, and the retailing of computer hardware, software, and supplies. However, some sectors saw price declines, such as apparel, footwear, and accessory retailing, which fell by 3.7 per cent, and securities brokerage and related services.

Prices for final demand goods edged up by 0.1 per cent in October after two months of declines. This increase was attributed to a 0.3 per cent rise in prices for goods excluding food and energy. Conversely, prices for energy and food items fell by 0.3 per cent and 0.2 per cent, respectively.

A notable driver in the goods category was an 8.4 per cent surge in carbon steel scrap prices. Meats, diesel fuel, fresh and dry vegetables, and oilseeds also saw price hikes. On the other hand, prices for liquefied petroleum gas plunged by 18.1 per cent, with chicken eggs and ethanol experiencing declines as well.

Intermediate Demand Insights

Prices for processed goods for intermediate demand rose 0.5  per cent in October, following two consecutive decreases. This was largely due to a 0.4 per cent rise in processed materials excluding food and energy, and a 1.2 per cent increase in processed energy goods. The processed goods index has decreased by 1.2 per cent over the past 12 months.

The unprocessed goods for intermediate demand category showed a significant increase of 4.1 per cent in October, marking the largest jump since August 2022. This rise was primarily driven by a 9.9 per cent surge in unprocessed energy materials, alongside gains in nonfood materials and foodstuffs. Key products contributing to the increase included crude petroleum, which rose 7.3 per cent, as well as natural gas and carbon steel scrap. However, hay and hayseeds saw a sharp price drop of 22.8 per cent.

For services in the intermediate demand category, prices ticked up 0.1 per cent in October, matching the increase in September. Gains were led by a 1.4 per cent rise in legal services and notable increases in portfolio management and airline passenger services. Meanwhile, margins for chemicals wholesaling and securities brokerage declined.

The October PPI data reflect continued inflationary pressures, especially within the services sector. While price growth remains moderate, the notable rise in specific goods and services suggests persistent underlying cost challenges. The data will be closely monitored as businesses assess cost strategies and potential impacts on consumer pricing.

Attribution: US Bureau of Labour Statistics