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Producer Prices Rise along with Prices for Final Demand Services

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Prices for final demand rose 0.3% in November

With an increase in final demand services, the producer price index for final demand, or PPI-FD, rose by 0.3% in November. It is above the consensus estimate and is higher than the decline of 0.4% recorded in the previous month.

For the past 12 months, the final demand index declined 1.1% in November, compared with a decrease of 1.6% in October 2015. As a result, the SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull and Bear 3X Shares ETF (SPXL) were up 1.1% and 0.15%, respectively, from a year ago as of December 11.

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Prices for final demand services rose 0.5% in November

The rising PPI-FD is mainly attributed to an increase in prices for final demand services by 0.5% in November, compared with a decline of 0.3% in October 2015.

In November, apparel, jewelry, footwear, and accessories retailing margins expanded by 6.2%. Also, indexes for machinery and equipment wholesaling, loan services, fuels and lubricants retailing, portfolio management, and long-distance motor carrying moved higher.

Prices for securities brokerage fell in November

In contrast, indexes for food and alcohol retailing and for water transportation of freight declined. The fall in prices for securities brokerage, dealing, investment advice, and related services were in the tune of 3.9% in November. As a result, the Financial Select Sector SPDR ETF (XLF) was down 2.8% over the past month as of December 11. Investment brokerage firms such as Goldman Sachs (GS), Citigroup (C), and Morgan Stanley (MS) have lost 8.4%, 4.4%, and 6.3% respectively, over the same period.

In the next part of this series, we’ll look at how prices for final demand goods have moved.

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