Producer Price Index October 2009

18 11 2009

Yesterday’s Bureau of Labor Statistics (BLS) release of the Produce Price Index (PPI) saw prices moving north again, this time a .3% gain compared to last months .6% loss.  The numbers seem to be stabilizing (one month a little up, on month a little down).  Looking into a little more depth we see that Energy and Food are the primary drivers.

If you are looking for more information relevant to your industry – check out www.bls.gov/ppi/.  They break out the information a number of different ways.

 

 

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Producer Price Index (PPI) August 2009

15 09 2009

As part of my Baumohl series on US Indicators, here is the press release on the August PPI data.  The PPI (Finished Goods) increased a seasonally adjusted 1.7% in August.  July saw a .9% decrease and June a 1.8% increase.

So what?

If we are looking for signs for the economy it is a good sign that things are again improving.  If we look at the last 12 months, 8 of the 12 months saw declines in the PPI including 5 straight months from Aug 08 through Dec 08.  4 of the last 5 months have seen positive advances.

What about Cost of Goods sold?  I would certainly expect some industries to see their COGS rate start to increase.  If we remember back to late 2007 and early 2008, ingredient prices started to rise dramatically.  See the chart below and notice the area where the PPI was elevated quite a bit about the trend line.

Aug 2009 PPI History

What does it mean to your business?  It clearly depends on the industry and your ability to act on external data.  If you are a bread manufacturer and your margins are pretty lean, you might need to look somewhere to balance your expense ratios.

Investing?  Look at your portfolio.  What industries are you invested in?  How does the PPI impact those companies?  If we are seeing the trend return to perhaps the elevated levels of late 07 / early 08, perhaps there are some solid opportunities?  Look at how those companies did during those time frames in terms of performance?