| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Output - M/M | 0.3% | 0.4% | 0.2% | |
| Output - Y/Y | -0.1% | -0.4% | -0.5% | |
| Input - M/M | 0.6% | 0.4% | 0.4% | 0.8% |
| Input - Y/Y | -2.6% | -2.3% | -2.0% |
Highlights
Versus expectations, the PPIs were mixed in September.
Factory gate prices rose 0.4 percent on the month, a tick higher than the market consensus, following an unrevised 0.2 percent increase in August. Annual output price inflation was minus 0.1 percent, its third successive sub-zero print but up from August's minus 0.5 percent. Amongst the components, the largest monthly rise was again in coke and refined petroleum products (6.9 percent) which was well ahead of all the other categories. Chemicals (minus 0.5 percent), food products (minus 0.3 percent) and other manufactured goods (minus 0.1 percent) all posted declines. Consequently, the core index was unchanged on the month, reducing the annual underlying rate from 1.5 percent to 0.7 percent, the lowest yearly reading since October 2020.
At the same time, raw material and fuel costs similarly increased a monthly 0.4 percent, slightly less than expected, following a steeper revised 0.8 percent gain last time. The yearly rate was minus 2.6 percent, down from minus 2.0 percent but only a 2-month low. Crude petroleum, natural gas and metal ores (5.5 percent) again saw easily the steepest monthly gain while fuel (minus 1.8 percent) recorded the sharpest decline.
Today's PPI updates should not overly trouble the BoE, particularly with the core output price measure having risen only once in the last five months. Even so, with CPI inflation still so high and prices in services climbing sharply, the central bank is unlikely to be overly impressed. The September data put the UK's RPI at exactly zero but with the RPI-P at minus 27, real economic activity is falling quite well short of forecasts.
Factory gate prices rose 0.4 percent on the month, a tick higher than the market consensus, following an unrevised 0.2 percent increase in August. Annual output price inflation was minus 0.1 percent, its third successive sub-zero print but up from August's minus 0.5 percent. Amongst the components, the largest monthly rise was again in coke and refined petroleum products (6.9 percent) which was well ahead of all the other categories. Chemicals (minus 0.5 percent), food products (minus 0.3 percent) and other manufactured goods (minus 0.1 percent) all posted declines. Consequently, the core index was unchanged on the month, reducing the annual underlying rate from 1.5 percent to 0.7 percent, the lowest yearly reading since October 2020.
At the same time, raw material and fuel costs similarly increased a monthly 0.4 percent, slightly less than expected, following a steeper revised 0.8 percent gain last time. The yearly rate was minus 2.6 percent, down from minus 2.0 percent but only a 2-month low. Crude petroleum, natural gas and metal ores (5.5 percent) again saw easily the steepest monthly gain while fuel (minus 1.8 percent) recorded the sharpest decline.
Today's PPI updates should not overly trouble the BoE, particularly with the core output price measure having risen only once in the last five months. Even so, with CPI inflation still so high and prices in services climbing sharply, the central bank is unlikely to be overly impressed. The September data put the UK's RPI at exactly zero but with the RPI-P at minus 27, real economic activity is falling quite well short of forecasts.
Market Consensus Before Announcement
Output prices are seen rising 0.3 percent on the month while input costs are expected to climb a steeper 0.6 percent.
Definition
The Producer Price Index (PPI) measures the prices of goods bought and sold by manufacturers. The input price index measure the prices of materials and fuels purchased by manufacturers for processing. These are not limited to just those materials used in the final product, but also include what is required by the company in its normal day-to-day running. The output price index captures prices charged by manufacturers as they pass through the factory gate and excludes any VAT or similar deductible tax. Both measures may be seen as leading indicators of consumer price index (CPI) inflation although the short-term correlation is only very weak.
Description
The PPI measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. A producer's price is the amount received by a producer from the purchaser of a unit of goods or services produced as output less any value added tax (VAT) or similar deductible tax, invoiced to the purchaser. It excludes any transportation charges invoiced separately by the producer.
The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. The output price indexes measure change in manufacturer' goods prices produced and often are referred to as factory gate prices. Input prices are not limited to just those materials used in the final product, but also include what is required by the company in its normal day-to-day operations.
The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.
The bond market rallies when the PPI decreases or posts only small increases, but bond prices fall when the PPI posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. The output price indexes measure change in manufacturer' goods prices produced and often are referred to as factory gate prices. Input prices are not limited to just those materials used in the final product, but also include what is required by the company in its normal day-to-day operations.
The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.
The bond market rallies when the PPI decreases or posts only small increases, but bond prices fall when the PPI posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
