Producer prices unexpectedly fell to end the year, according to the latest data from the Bureau of Labor Statistics.
- M-O-M: Producer prices fell 0.1% in December, the same drop that we saw in November and the third straight monthly drop.
- Y-O-Y: Producer prices did slightly rise to 1.0% when compared to the same time as last year, up from 0.8% in November but the third best month for the year.
Beat The Street. Economists were expected prices to rise 0.1% for the month which they thought would rise the year-over-year index to 1.3%.
Deflationary Goods. Final demand fell for the third straight month with 0.4% decline from November. Prices finished the year down 0.8% when compared to the same time last year.
- Final demand for services were flat for the third straight month which put the year-over-year index at 1.8% in December.
BOTTOM LINE: Producer prices front run CPI and the fact that PPI was under 2.0% (the Fed’s target rate) for 6 months this year is a good sign for inflation going forward.