October producer prices rose by 1.1 percent year-over-year, matching the consensus and primarily due to a 5.6 percent drop in energy prices. However, compared to September, producer prices saw a modest 0.2 percent increase, some 0.3 percentage points stronger than the market consensus. Notably, energy costs rebounded by 0.6 percent month-over-month, driven by increased natural gas (1.1 percent) and electricity (0.5 percent). Despite this, mineral oil product prices remained a key deflationary factor, with heating oil and motor fuels significantly cheaper than the previous year.

Excluding energy, producer prices rose by 1.3 percent annually, up from 1.2 percent last time, reflecting inflationary pressure in capital and consumer goods. Capital goods prices rose 2.0 percent and non-durable goods 1.9 percent rise. Meanwhile, durable consumer goods rose a more modest 0.9 percent.

Intermediate goods displayed mixed trends, with notable price hikes in coniferous timber and electric transformers, contrasted by declines in metals like steel.

The latest update puts the RPI at minus 4 and the RPI-P at minus 12, showing overall economic activity behaving broadly in line with expectations.

Forecasts center on a modest 0.1 percent decline on the month and a 1.1 percent decline on year.

The Producer Price Index (PPI) measures the price of industrial and commercial goods produced and sold domestically (excluding turnover tax). About 1,250 types of goods are used to calculate the index and prices are reported by a total of 5,000 enterprises under fixed contractual conditions. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer and, in contrast to the consumer price index (CPI), excludes VAT and other deductible taxed associated with turnover.

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).

Because the index of producer prices measures price changes at an early stage in the economic process, it can serve as an indicator of future inflation trends. The producer price index and its sub-indexes are often used in business contracts for the adjustment of recurring payments. They also are used to deflate other values of economic statistics like the production index. It should be noted that the PPI excludes construction. These price statistics cover both the sales of industrial products to domestic buyers at different stages in the economic process and the sales between industrial enterprises.

The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. 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 they 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.