JP: Producer Price Index

August 9, 2016 06:50 CDT

Consensus Actual Previous
Year over Year -4.0% -3.9% -4.2%
Month over Month 0.0% -0.1%

The producer price index remains mired in deflation where it has been since April 2015. The July producer price index retreated 3.9 percent from a year ago after dropping 4.3 percent in June. On the month, the PPI was unchanged. Petroleum and coal products continue to weigh on the index, sinking 19.5 percent from a year ago. Also exerting downward pressure was nonferrous metals, down 14.2 percent. Chemicals & related products were 8.4 percent lower from a year ago.

According to the Bank of Japan, the PPI is expected to continue to decline thanks to declines in commodity prices.

The Producer Price Index (PPI) is a measure of the average price level for a fixed basket of capital and consumer goods paid by producers. Analysts look to the PPI for early signs of inflation in the production process.

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.