Just as moments ago a far weaker than expected retail sales report once again confounded economic watchers who, in the aftermath of the second month of surprisingly strong payrolls, were expecting the upward momentum to continue, so at the same time we got the latest producer price report, according to which PPI for final demand decreased 0.4% in July. This was well below the consensus estimate of a 0.1% print, matching the lowest estimate of polled economists, and a substantial drop from last month’s 0.5% increase.
According to the BLS, the decline in the final demand index was led by prices for final demand services, which fell 0.3 percent. The index for final demand goods decreased 0.4%. Prices for “core” final demand, less foods, energy, and trade services were unchanged in July after rising 0.3 percent in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services increased 0.8 percent.
As the BLS adds, nearly 60 percent of the decrease in prices for final demand
services is attributable to margins for apparel, jewelry, footwear, and
accessories retailing, which fell 6.0 percent, while a major factor in the decrease in the index for final demand goods was prices for beef and veal, which fell 9.8 percent.
The breakdown:
- BLS said final demand producer prices had risen 0.5% in June
- Final demand ex food, energy fell 0.3% m/m vs est. up 0.2%
- Final demand fell 0.2% y/y vs est. up 0.2%
- Final demand ex food, energy rose 0.7% y/y vs est. up 1.2%
- Final demand ex food, energy and trade services unchanged m/m
- Final demand personal consumption fell 0.4% m/m
- Final demand personal consumption fell 0.4% y/y
- Health care services (before adjusting for seasonal variations) rose 1.2% y/y; rose 0.3% m/m
From the report:
Final demand services: The index for final demand services fell 0.3 percent in July, the largest decline since moving down 0.3 percent in March. The July decrease can be traced to margins for final demand trade services, which fell 1.3 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand services less trade, transportation, and warehousing advanced 0.2 percent, and the index for final demand transportation and warehousing services increased 0.1 percent.
Product detail: Nearly 60 percent of the decrease in prices for final demand services is attributable to margins for apparel, jewelry, footwear, and accessories retailing, which fell 6.0 percent. The indexes for machinery and equipment wholesaling; health, beauty, and optical goods retailing; food retailing; loan services (partial); and automotive fuels and lubricants retailing also declined. In contrast, prices for traveler accommodation services climbed 3.9 percent. The indexes for chemicals and allied products wholesaling and for securities brokerage, dealing, investment advice, and related services also moved higher. (See table 4.) Final demand goods: The index for final demand goods declined 0.4 percent in July following three straight increases. Almost half of the decrease can be traced to prices for final demand foods, which fell 1.1 percent. The index for final demand energy moved down 1.0 percent. Prices for final demand goods less foods and energy were unchanged.
Product detail: A major factor in the decrease in the index for final demand goods was prices for beef and veal, which fell 9.8 percent. Prices for gasoline, corn, motor vehicles, oilseeds, and iron and steel scrap also moved lower. Conversely, the index for utility natural gas advanced 4.3 percent. Prices for eggs for fresh use and nonferrous scrap also increased.
In the aftermath of the two economic reports, rate hikes odds are predictably sliding, with the market now pricing in a 50% chance of the first rate hike taking place in March 2017.
via http://ift.tt/2b2olPX Tyler Durden