JP: Producer Price Index

Wed Nov 11 17:50:00 CST 2015

Consensus Actual Previous Revised
Month over Month -0.4% -0.6% -0.5% -0.6%
Year over Year -3.5% -3.8% -3.9% -4.0%

Producer prices continue to deflate. October producer prices swooned a greater than expected 3.8 percent from a year ago analysts expected a decline of 3.5 percent. On the month, the PPI was down 0.6 percent for a third month. Once again petroleum was a major factor in pulling down the overall price index. Petroleum & coal products plunged 27.1 percent from a year ago. Chemicals & related products dropped 8.5 percent, nonferrous metals were down 5.3 percent and iron & steel declined 5.1 percent.

There were subcategories with price gains. Transportation prices however, were 0.6 percent higher while textiles gained 0.5 percent. Food & feedstuffs were 1.1 percent higher from a year ago. But even with these increases, there is a long way to go before deflation is defeated.

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.