Producer Prices are the costs that factories and manufacturers incur when buying the raw materials, components, and unfinished goods, that they use to make a finished product.
You may be as surprised as I am to find out that there is no inflation at the Producer Input level. As incredible as it sounds, in light of all the shouting about inflation, when we look at Producer Prices, they only rose 1/10th%, not for the month or quarter but for the entire year.
An annual price rise of a mere 0.1% is just where we want to be. There is no need to go into deflation at the Producer level.
What a contrast with last year at this time. In June 2022, the Producer Price Index was rising at 11.2%, driven primarily by an 8% rise in the cost of energy. This year energy costs have come under control. In this June report, energy only rose by 0.7%. As long as energy remains contained, we will not have inflation at the Producer level.
Producer Price Index (blue, left scale), Global Energy Index (red, right scale)
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