JP: Producer Price Index

May 14, 2017 06:50 CDT

Consensus Actual Previous
Month over Month -0.1% 0.2% 0.2%
Year over Year 1.8% 2.1% 1.4%

Japan's producer price index advanced 2.1 percent on the year in April after an increase of 1.4 percent in March, above the consensus forecast of 1.8 percent. Year-on-year growth in the index has been trending higher since mid-2016 and is now at its highest level since late 2014. The index rose 0.2 percent on the month, matching the increase seen in March and stronger than the consensus forecast for a decline of 0.1 percent.

The month-on-month increase in April reflected higher prices for iron and steel products (up 2.1 percent on the month) and electric power, gas and water (up 1.6 percent). This was partly offset by a 1.3 percent decline in prices for petroleum and coal products, with most other categories seeing relatively little change in their prices on the month.

The strong upward trend in producer prices over the last twelve months has yet to translate into appreciably stronger consumer prices, with both headline and core measures of the year-on-year change in the CPI still close to zero in recent months. Officials at the Bank of Japan continue to forecast only only a gradual increase in consumer price pressures over the medium-term.

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.