The Producer Price Index (finished goods) prices increased 5.7% year-over-year in November 2011 (less than the 5.9% in October) – although increasing 0.3% month-over-month. Inflation pressure continues to moderate above the consumer level.
The reasons for the month-over-month increase in finished goods was mostly due to food, but energy increases were the primary drivers for the month-over-month increases in intermediate goods and crude goods.
Econintersect has shown how the pricing changes moves from the PPI to the Consumer Price Index (CPI). This YoY change implies that the CPI – which will be released tomorrow, should come in around 3.0% YoY. Last month (October 2011) the CPI YoY change was 3.5% (analysis here).
Overall, the yearly rate of price inflation for finished goods since April 2011 have remained between 6.6% and 7.2% – and October 2011 5.9% broke out of the bottom of the range, and November 2011 5.7% year-over-year increase is continuing this less good trend.
Caveats on the Use of Producer Price Index
Econintersect has performed several tests on this series and finds it fairly representative of price changes (inflation). However, the headline rate is an average – and for an individual good or commodity, this series provides many sub-indices for specific application.
Because of the nuances in determining the month-over-month index values, the year-over-year or annual change in the PPI index is preferred for comparisons.
There is moderate correlation between crude goods and finished goods as shown on the graph below. Higher crude material prices push the finished goods prices up.