A producer price index inflation spike is on the way too

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

PPI: -1.1%.
2020 Goods: -2.8%.
Services: -0.4%.
Energy: -17.3% .

Producer price index month-over-month February 2021

April 2020 PPI: 0.5%.
April 2020 Goods: 1.4%.
April 2020 Services: 0.1%.
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

PPI: -1.5%.
Goods: -5.2%.
Services: +0.3%.
Energy: -30.7%.

Producer price index year-over-year February 2021

PPI: 2.8%.
Goods: 3.4%.
Services: 2.5%.
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.

Author

Mike “Mish” Shedlock's

Sitka Pacific Capital Management,Llc

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