Feb PPI fell .6% headline vs expectations of a drop of .2% but the core gain of .1% was right in line with forecasts. The headline figure was led lower by a 2.9% fall in energy prices (led by gasoline) while food prices rose .4%. Energy prices have since reversed, with gasoline in particular at the highest level since Oct ’08 so PPI will move up again in March. Inflation in the pipeline was mixed but comes after strong gains in Jan. Goods at the intermediate stage of production rose .1% after a 1.7% gain in Jan. Ex f&f it was up .9%. Crude goods inflation fell 3.5% but follows a 9.6% rise in Jan. Ex f&f, prices fell .6% but follows a 6.6% gain in Jan. On a y/o/y basis, overall PPI is up 4.4% and the core is up 1%. Bottom line, because of the moving piece of energy, the headline fall is old news and tomorrow’s CPI report will be more relevant to market action.

Category: MacroNotes

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