Mike “Mish” Shedlock's
Sitka Pacific Capital Management,Llc
As with the CPI, a PPI year-over-year inflation spike is baked in the cake.
Producer price index month-over-month April 2020
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PPI: -1.1%.
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2020 Goods: -2.8%.
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Services: -0.4%.
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Energy: -17.3% .
Producer price index month-over-month February 2021
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April 2020 PPI: 0.5%.
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April 2020 Goods: 1.4%.
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April 2020 Services: 0.1%.
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Energy: 6.0%.
Q: Why does Energy have such a small impact on the PPI?
A: The following chart explains.
PPI final demand weights
Energy is 15.5% of goods but only 5.0% of the overall PPI.
PPI year-over-year
Producer price index year-over-year April 2020
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PPI: -1.5%.
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Goods: -5.2%.
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Services: +0.3%.
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Energy: -30.7%.
Producer price index year-over-year February 2021
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PPI: 2.8%.
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Goods: 3.4%.
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Services: 2.5%.
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Energy: 5.5%.
What's going to happen?
The year-over-year comparisons in March, April, and May are going to show huge percentage year-over-year jumps, especially April and May due to comparisons vs. the initial pandemic numbers in Spring of 2020.
Services will act as a bit of a stabilizer given they constitute 66% of the PPI, but the energy numbers are so huge they will have a very noticeable impact.
This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.
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