Research Excerpts

Core Producer Prices Strongest In 2 Years

Posted on: Tuesday, November 18th, 2014

The chart below shows that the 2.1% year-over-year change in the October core (less food and energy) Producer Price Index (PPI) is the highest since November 2012.

The chart also shows that this metric has been steadily rising since bottoming at 1.1% in August 2013.

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What it Means for Investors

The biggest attribute of the PPI is its ability to predict the Consumer Price Index (CPI), which is due for release on Thursday.  The theory is that most cost increases that are experienced by retailers will be passed on to customers, which would then show up in the CPI data. Because the CPI is the most widely watched inflation gauge, investors will look to get a sneak preview by looking at the PPI figures. The Fed also knows this, so it studies the report intently to get clarity on future policy moves that might have to be made to fight inflation.

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