Increasing for the fourth consecutive month, the PPI for final demand increased 0.3 percent in February. The month’s gain was led by services, however, solid price gains were recorded elsewhere.
Stronger-Than-Expected Headline Gain
Accounting for over 80 percent of the headline’s gain, final demand services increased a solid 0.4 percent on the month. Final demand goods prices rose for the sixth consecutive month, up 0.3 percent, largely on higher energy prices.
Our preferred measure of core PPI, which excludes energy, food and trade services, also increased 0.3 percent, signaling some acceleration in the underlying trend of core inflation.
Pipeline Pressures Building
On balance, pipeline pressures continue to build. Intermediate processed goods increased for the sixth straight month, up 0.4 percent, with the gain tied to price gains outside of food and energy. Unprocessed intermediate goods slipped 0.2 percent, in part, on a 4.3 percent drop in energy materials prices.
In short, producer prices were stronger than expected, keeping a rising inflation outlook in 2017 as the base case.
