From Wolf Street, August 13:
Whiplash-causing month-to-month services PPI fell in July after hot readings in prior months. Core goods PPI is well-behaved.
The sharp deceleration on a year-over-year basis of the core Producer Price Index and the services PPI in July was a one-time shot, caused by the services PPI of July 2023 (+9.9%), the highest month-to-month reading in over two years, to fall out of the 12-month figure and be replaced by July 2024 (-1.9%), lowest month-to-month reading since March 2023.
It won’t repeat the rest of the year because all the remaining month-to-month figures that will fall out of the average over the next five months were low to negative. And the base effect that was such a tailwind in July will flip to a headwind in August and going forward.
And in terms of the month-to-month figures (the blue lines in the charts below), well they’re whiplash volatile.
On a month-to-month basis, the Producer Price Index for final demand, which tracks inflation in the goods and services that companies buy and ultimately try to pass on to their customers, decelerated in July from June, on a plunge into the negative by the services PPI, after the hot readings in prior months. The PPI for finished core goods, which exclude food and energy products, accelerated month to month but remains well-behaved.
Services PPI fell by 1.9% annualized in July from June, seasonally adjusted, after the jumps of 5.2% in June, 4.7% in May, and 7.1% in April, according to data by the Bureau of Labor Statistics today (blue in the chart below).
The 6-month average decelerated to 3.4% annualized in July, after having risen at a red-hot pace of 4.9% in June, the highest since August 2022 (red). The six-month rate irons out some of the whiplash volatility of the month-to-month readings and includes all revisions. It decelerated so sharply because the 7.1% January reading fell out of the average and was replaced by the negative 1.9% July reading....
....MUCH MORE, including a bit of chartmania.
