Shocker in PPI: 0.9% vs. 0.2% m/m consensus:
Figure 1: Top panel, Instantaneous inflation for core CPI (blue), core PCE deflator (green); Bottom panel, core PPI (tan). All per Eeckhout (2023), T=12, a=4. Source: BLS, BEA, via FRED, Goldman-Sachs and author’s calculations.
GS indicates 2.9% y/y based on PPI, CPI. Cleveland Fed is at 2.89% based on CPI.
PPI, Final Demand, alongside core CPI:
https://fred.stlouisfed.org/graph/?g=1Lprc
Biggest ome-month rise in final-demand PPI since 2022, at 0.4%.
I make no claim for the predictive power of final-demand PPI, certainly not on a month-by-month basis, but there is a correlation over longer periods.
MD,
I thought I would have an easy time developing a Granger causation relationship between FRED series, CPILFESL (CPI Core) and the Producer Price Index by Commodity: Final Demand, FRED series (PPIFID), of course with the Granger causation moving from PPI to CPI. I used data back to 2007. No success yet.
Maybe not enough elevated PPI data yet.
AS: Probably hard with structural breaks, etc. See also this paper.
Howdy! Thanks for responding.
One thought. Back when inflation was running quite high in 2022, corporate profits were also up – margins were generally not compressed due to higher costs, but rather improved. One explanation offered for this was that firms anticipated higher costs and increased prices with the aim of maintaining profits – the increase in profits was explained to be temporary, until already-anticipated costs caught up. If firms hadn’t raised prices before costs went up, the explanation goes, they’d have been cash-strapped when it cmae timeto restock at newly-inflated prices.
You can see the Granger problem that this behavior would cause.
I understand this claim sounds like an excuse for price gouging, but some of the work in support of the claim seemed credible, at least to me.
MD,
I notice that there is Granger causation using CPILFESL and PPIFES.
At first look, however, Granger causation seems to go both ways.
Unfortunately, in both VAR cases, the residual evaluation shows difficult situations.
So, not a lot of confidence in the Granger conclusions.
so the impotent texas troll governor says “How embarrassing. Texas Democrats mailing in their ‘demands’… FROM CHICAGO. Come back and fight like Texans rather than running and hiding like cowards.”
ok troll, we can be just as rude and derelict as you. hey abbott, why not stand up and fight like a texas man?
abbott and the republicans are simply driving texas down to the lowest common denominator, and fast. as I have said, the rest of the country needs to be very wary of what has been happening in texas over the past few years. totalitarianism is spreading from the White House to states like texas, with abhorrent illegal behavior. texas is at the point they want to arrest democratic state representatives who do not vote the way abbott demands. they already permit voter intimidation with republican hotheads with guns stationed around voting sites.not a functioning democracy in texas at this time. and its a big and influential state. the nation really needs to pay attention to this garbage in texas.