| Actual | Previous | Revised | |
|---|---|---|---|
| Month over Month | -0.8% | -4.3% | -4.2% |
| Year over Year | 0.2% | -0.8% | -0.7% |
Highlights
Producer prices fell by 0.8 percent in May following a revised 4.2 percent decline in April and gained 0.2 percent year-on-year as prices for mined and quarried products, energy, and water fell less sharply than the previous month. After contracting 14.7 percent in April, they fell by 3.4 percent in May, marking 18 consecutive months of contraction.
That decline was attributed to electricity prices dropping 5.8 percent in May, following a 24 percent contraction in April. Electricity demand declined on the back of bank holidays and high production of solar power which resulted in some periods of negative energy prices.
Other major sectors were for the most part subdued in May, with prices for transportation equipment falling 0.1 percent, with manufactured goods prices and electronic equipment and computers falling by the same amount.
Prices for imported industrial products fell 0.7 percent in May, moderating from a 2.1 percent drop the previous month. On the year, import prices fell 1.3 percent. Prices for coke and refined petroleum products fell 2.5 percent in May, likely helped by the Euro's strength versus the dollar.
Today's report shows there is no inflationary pressure in the pipeline domestically or from abroad.
That decline was attributed to electricity prices dropping 5.8 percent in May, following a 24 percent contraction in April. Electricity demand declined on the back of bank holidays and high production of solar power which resulted in some periods of negative energy prices.
Other major sectors were for the most part subdued in May, with prices for transportation equipment falling 0.1 percent, with manufactured goods prices and electronic equipment and computers falling by the same amount.
Prices for imported industrial products fell 0.7 percent in May, moderating from a 2.1 percent drop the previous month. On the year, import prices fell 1.3 percent. Prices for coke and refined petroleum products fell 2.5 percent in May, likely helped by the Euro's strength versus the dollar.
Today's report shows there is no inflationary pressure in the pipeline domestically or from abroad.
Definition
The producer price indices (PPI) measure transaction prices, exclusive of VAT, for goods from industrial activities sold on the French market. Construction is excluded. 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.
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).
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.
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 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.
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.
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 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.
