Producer Price Index Increase Typical for New Normal

The Producer Price Index (PPI) rose 0.8% in November 2010.  The BLS headlines:

The Producer Price Index for Finished Goods rose 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed a 0.4-percent advance in both October and September. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 1.1 percent in November, and the crude goods index moved up 0.6 percent.  On an unadjusted basis, prices for finished goods rose 3.5 percent for the 12 months ended November 2010, their smallest 12-month increase since a 3.1-percent advance in August. (See table A.)

As the above table indicates – a portion of the increased costs at the various levels of production are being absorbed – and only a small portion of costs are being passed on to the consumer.  The November Consumer Price Index (CPI) will be released later this week.

Also of interest, there appear to be seasonal adjustment issues in the PPI.  In the new normal, November increases are high MoM, while YoY comparisons are low.  When this situation presents itself in seasonally adjusted data – you can be sure the adjusting methodology needs adjustment more than the underlying data.

Nothing really pops out in the data except for massive MoM cost increases in eggs and soybeans.