Producer Price Index Fell In October

Demand for services had been holding up producer prices but not for the last two reports. PPI-FD fell an unexpected 0.4 percent in October vs Econoday expectations for a 0.2 percent gain and vs a low estimate of minus 0.1 percent. Year-on-year, prices are down a very sizable 1.6 percent. Services prices fell 0.3 percent in October following what was then an unexpected 0.4 percent decline in September. Year-on-year, services prices are up only 0.1 percent. Services are supposed to be insulated from global effects including price effects, and the downturn for this reading does not point to 2 percent target inflation anytime soon.

Recent History Of This Indicator:
Producer prices - final demand are expected to bounce higher in October, up 0.2 percent for the headline and up a consensus 0.1 percent for the core. The gains would follow wide weakness in September as the services component, which makes up about 60 percent of the report, reversed two prior months of strong gains with a sizable 0.4 percent decline. Year-on-year rates have been falling deeper into negative territory, to minus 1.1 percent for the headline reading in September.