JP: Producer Price Index

Tue Sep 12 18:50:00 CDT 2017

Consensus Actual Previous
Month over Month 0.1% 0.0% 0.3%
Year over Year 3.0% 2.9% 2.6%

Japan's producer price index rose 2.9 percent on the year in August, up from 2.6 percent in July and just below the consensus forecast of 3.0 percent. Year-on-year growth in the index has been trending higher since mid-2016. The index was flat on the month in August after an increase of 0.3 percent in July, again just below the consensus forecast of 0.1 percent.

The increase in the year-on-year change in the PPI was partly driven by a sharper year-on-year increase in electric power, gas and water charges, up from 7.8 percent in July to 9.6 percent in August. Agriculture, forestry and fishery products also recorded sharper price increases, though year-on-year increases in other major categories including food and beverages, transportation equipment, and petroleum and coal products were little changed from the pace set in July.

Despite the strong upward trend in producer prices over the last twelve months, officials at the Bank of Japan continue to forecast only a gradual increase in consumer price pressures over the medium-term. PMI data for the Japanese manufacturing sector showed weaker growth in input costs and only a marginal increase in selling prices in August.

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.