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Producer Price Index Falls with Prices for Final Demand Goods

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Jan. 19 2016, Updated 6:02 a.m. ET

Producer price index for final demand declines

According to the US Bureau of Labor Statistics, the PPI-FD (producer price index for final demand) moved down 1.0% in December, year-over-year, compared with a decrease of 1.1% in November 2015. As a result, the SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 3X ETF (SPXL) were down by 7.1% and 22.7%, respectively, from a year prior to January 15.

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PPI-FD falls 0.2%

With a decrease in prices for final demand goods, the PPI-FD fell 0.2% month-over-month in December. It is below the consensus estimate and is lower than the 0.3% increase recorded in the previous month.

Prices for final demand goods decline

In December, the prices for final demand goods were down 0.7% on a monthly basis, compared with a 0.1% decline in the previous month. A fall in prices of gasoline by 8.3% contributed towards the PPI-FD goods staying in negative territory for the sixth consecutive month. Moreover, the prices for pharmaceutical preparations rose 1.1% in December.

Energy stocks ExxonMobil (XOM), Chevron (CVX), Schlumberger (SLB), and Valero Energy (VLO) fell 2.0%, 10.5%, 11.5%, and 5.4%, respectively, over the month prior to January 15.

Prices for final demand services rose 0.1% in December

The rise in prices for services related to securities brokerage and dealing by 30.3% enabled the prices for final demand services to increase by 0.1% in December, compared with a 0.5% increase in November 2015. However, the margins for apparel, jewelry, footwear, and accessories retailing fell 3.4% in December.

The decline in prices for final demand in December could indicate that consumer price inflation may be headed lower in the future. We’ll discuss how the lower prices may influence consumer sentiment in the next part of this series

 

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