Updated: 14-May-09 17:29 ET

April PPI

Updated: 14-May-09 17:29 ET

Highlights

• April PPI was up 0.3%.  That was a bit above the expected 0.2% but that is not a wide variance for this series.  The boost came from a greater-than-expected 1.5% increase in food prices that is not likely to continue.  Food prices had been down 2.3% combined over the prior two months.
• The core rate for PPI was up 0.1%, in-line with expectations.  It was flat the prior month.  The flattening trend is likely to continue in the months ahead due to weak demand.  Energy prices were down 0.1% and are likely to bump up next month.

Key Factors

• The overall trend in producer level prices is of modest increases. There is no deflation, and not much inflation.  From the Fed's viewpoint, these data are probably not causing much concern.

Big Picture

• PPI trends were highly volatile in 2008, mirroring the trends in global oil prices.  In early 2009, the core rate will rise modestly if at all, while energy prices could stabilize.  That would leave PPI near flat.  Falling global commodity prices and weak economic demand will keep inflation in check at the producer level.  If global economies remain weak in 2009, as is widely expected, inflation at the producer level will be insignificant.  There may even be concerns about global deflation.