JP: Producer Price Index

Sun Nov 12 17:50:00 CST 2017

Consensus Actual Previous Revised
Month over Month 0.1% 0.3% 0.2% 0.3%
Year over Year 3.1% 3.4% 3.0% 3.1%

Japan's producer price index increased by 3.4 percent on the year in October, up from a revised 3.1 percent in September and exceeding the consensus forecast of 3.1 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 0.3 percent on the month in October after a revised increase of the same amount in September, again above the consensus forecast of 0.1 percent.

The increase in the headline year-on-year change in the PPI was broad-based, with most components reporting stronger price increases in October compared with September. Beverage and food prices, representing around 14 percent of the index, were flat on the year in October after falling by 0.3 percent in September, while prices for transportation equipment (also around 14 percent of the index ) rose 0.1 percent after falling by 0.3 percent previously. The year-on-year increase in utilities costs (around 7 percent of the index) accelerated from 10.9 percent to 11.2 percent, while petroleum and coal prices (around 6 percent of the index) rose 15.8 percent on the year, up from 14.0 percent in September.

Consistent with today's official data, PMI survey data for the Japanese manufacturing sector showed input costs rose at their fastest pace in six months in October, with growth in selling prices also reported to have picked up. However, despite the solid 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.

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.