Key US producer price inflation data preview - Nomura

Analysts at Nomura offered a preview of key US producer price inflation data.

Key Quotes:

"Producer price inflation data in August remained modest with headline PPI increasing 0.2% m-o-m and core (excluding food, energy and trade) increasing 0.2% mo-m. Finished core consumer goods prices, a component relevant for core CPI, rose steadily 0.1%. In September, the prices of refined petroleum increased sharply due to the recent hurricanes. It is likely that PPI for fuel would reflect the increases and boost headline PPI. 

Further, major supply-chain disruptions caused prices of raw material and intermediary goods to rise sharply as reflected in an increase in the price paid indices of business sector surveys. However, it is unclear how much of these increases will be passed through to prices of the finished products at the factory gates. 

Especially, there has been an increasing divergence between y-o-y inflation of the PPI of finished core consumer goods and core intermediate goods, suggesting that not all of the inflationary pressure on input prices would be passed to the prices of finished goods. In addition, producer prices of residential electricity are an area of increased uncertainty due to power outages caused by Hurricane Irma in Florida. 

We expect the power outages to be somewhat negative to PPI for electricity as damage to the electrical grid may likely have lowered demand for residential electricity. Elsewhere, the prices of building materials may show transitory increases, considering the precedent of Hurricane Katrina. Note that our September CPI inflation forecasts may be subject to revision after the release of the PPI report."