JP: Producer Price Index

Wed Jan 14 17:50:00 CST 2015

Consensus Actual Previous
Month over Month 0.0% -0.4% -0.2%
Year over Year 2.4% 1.9% 2.7%

December producer price index was down 0.4 percent on the month and up 1.9 percent on the year. Analysts expected the PPI to be unchanged on the month and up 2.4 percent on the year. Since reaching an annual increase of 4.5 percent in June, the gains have been deteriorating. Excluding the sales tax, the PPI was down 0.4 percent on the month and down 0.9 percent on the year. The data will certainly disappoint the Bank of Japan as it endeavors to erase deflation.

Among the subindexes, it was no surprise that petroleum & coal products prices were down 8.8 percent from a year ago. Electronic components & devices were down 0.8 percent. Prices for nonferrous metals climbed 9.6 percent. Food prices were up 2.9 percent while textile products were up 4.2 percent.

The producer price index, is a measure of the average price level for a fixed basket of capital and consumer goods paid by producers.

The producer price index focuses on the prices of goods transacted between companies. It was previously known as the corporate goods price index. The index reflects the price level for the supply and demand of individual industrial goods. This index is calculated by the BoJ Research and Statistics Department. Three indexes are contained in this release - the domestic producer index, the export price index and the import price index. It is the domestic index that market players follow. The PPI comprehensively tracks input price pressures; however, the PPI has a track record of increasing and not necessarily feeding through to the CPI because of weak demand. But if an increase in the PPI is followed by a rise in the CPI, concerns about inflation may prompt the Bank of Japan to raise interest rates.