After yesterday’s hotter-than-expected CPI, all eyes are on this morning’s PPI print for dovish hopes that the blip in CPI is ‘transitory’. Of course, there is the baffle ’em with bullshit print too… as data shows the MoM prints cooler than expected but the YoY prints hotter than expected.

Headline PPI was unchanged MoM (cooler than the +0.1% expected) but it was up 1.8% YoY (hotter than the +1.6% exp)… but down from the upwardly revised 1.9%!?

Source: Bloomberg

Energy prices weighed the PPI down (that won’t last!) as Food and Services surged…

Source: Bloomberg

Final demand goods: The index for final demand goods decreased 0.2 percent in September following no change in August. The decline can be traced to a 2.7-percent drop in prices for final demand energy. In contrast, the indexes for final demand foods and for final demand goods less foods and energy increased 1.0 percent and 0.2 percent, respectively.

Product detail:

Leading the September decline in prices for final demand goods, the index for gasoline decreased 5.6 percent.

Prices for diesel fuel, jet fuel, chicken eggs, home heating oil, and plastic resins and materials also fell.

Conversely, the index for processed poultry jumped 8.8 percent.

Prices for electric power and for motor vehicles also moved higher.

Final demand services: The index for final demand services moved up 0.2 percent in September after rising 0.4 percent in August. Leading the broad-based increase in September, prices for final demand services less trade, transportation, and warehousing advanced 0.1 percent. The indexes for final demand trade services and for final demand transportation and warehousing services also rose, 0.2 percent and 0.3 percent, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail:

A 3.0-percent increase in the index for deposit services (partial) was a major factor in the September advance in prices for final demand services.

The indexes for machinery and vehicle wholesaling, furniture retailing, desktop and portable device application software publishing, apparel wholesaling, and airline passenger services also rose.

Conversely, margins for professional and commercial equipment wholesaling fell 6.3 percent.

The indexes for securities brokerage, dealing, investment advice, and related services and for consumer loans (partial) also moved lower.

More problematic for the doves is that core PPI jumped to +2.8% YoY (hotter than the 2.6% exp) as PPI ex-food-and-energy rose 0.2% MoM as expected…

Source: Bloomberg

On a YoY basis, Services costs are accelerating…

Source: Bloomberg

…and the deflationary drag of Energy prices won’t last…

That’s a long way from The Fed’s mandated 2%… and it’s going the wrong way!