October PPI Falls 0.3%, Declining More Than Expected

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Headline: PPI eased 0.3% in October, while core PPI which excludes food and energy held steady from September.Meanwhile, PPI for finished goods fell 0.3% in October.

The drop was in large part attributed to the decline in energy costs:

“Prices for finished energy goods moved down 1.4 per cent in October, the largest decrease since a 2.3-per cent drop in June 2011. Nearly two-thirds of the October decline can be attributed to the gasoline index, which fell 2.4 per cent. Lower prices for residential natural gas and home heating oil also were factors in the drop in the finished energy goods index.

Read the full report from the Bureau of labour Statistics here.

Expectations: PPI is expected to fall 0.2% in October, after jumping to 0.8% last month.

Core PPI, which excludes food and energy, is expected to gain 0.1% from the previous month.

Analysis: Producer Price Index is important because it is a major indicator of commodity prices in the manufacturing sector. Because these costs are eventually passed on to the consumer, it is an indicator of changes in consumer prices. Tracking PPI helps investors and analysts understand how this could affect interest rates down the line.

Moreover, with the Federal Reserve looking at a third round of quantitative easing, everyone’s eye is on inflation numbers.

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