Producer Prices Rise As Expected

A big jump in transport services headlines what is otherwise, however, another benign producer price report. The PPI-FD rose an as-expected 0.2 percent in September with the year-on-year rate slipping 2 tenths to 2.6 percent. But transport prices surged 1.8 percent in the month with this yearly rate showing very clear pressure at 5.9 percent. Lack of capacity in the shipping sector, including lack of trucks and especially lack of truck drivers, has been a serious constraint in 2018.

Otherwise the data once again look subdued. Goods prices fell 0.1 percent in September with energy down 0.8 percent and foods down 0.6 percent with the latter posting a 1.8 percent monthly drop for related exports. Construction prices, where capacity issues are also a concern, rose only 0.1 percent though the year-on-year rate did climb 2 tenths to 3.4 percent.

Overall service prices rose 0.3 percent in the month but this yearly rate remains tame at 2.4 percent. Trade service prices, which track wholesalers and retailers, fell sharply in August and July and managed only a 0.1 percent September increase with this yearly rate not showing much pressure at all, at only plus 0.9 percent.

Steel and aluminum prices, which jumped earlier this year on tariff effects, are turning tame, unchanged in the month for steel mill products and down 0.3 percent for aluminum mill shapes. Yet the yearly rates do reflect the earlier pressure, up 18.1 percent for steel and 10.7 percent for aluminum.

The isolated pressure for transportation and shipping aside, this report isn't showing any sustained pressure at all and contrasts starkly with the highly elevated indications for input costs in most anecdotal surveys. Today's results will not raise any alarms going into tomorrow's consumer price report where subdued results are also expected.