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First Cut: Final Demand PPI continues to see higher energy costs in April, but food and trade services down

The Final Demand PPI for April was up 0.2% month-over-month overall, while the core — PPI excluding food, energy, and trade services — was up 0.4%. However, both measures were up 2.2% compared to a year-ago.

Food prices were down 0.2%, probably due to the 11.6% decline in fresh and dry vegetables as spring produce began in to reach grocery stores.

Energy prices were still on the rise at up 1.8%, reflecting another month in which gasoline prices continued to increase. Prices for gas normally increase in April and early May as refineries switch over to summer formulations. However, the rise was boosted by higher petroleum prices as well.

Trade services were down 0.5% in April, accounting for the bulk of the mild increase in the PPI. The PPI excluding food and energy only was flat.

As a footnote, final demand construction services was up 1.6% in April from March and up 5.4% from the year-ago month. Costs for homebuilding are going to be passed on to buyers. Low mortgage rates, improving incomes, and limited stocks of existing homes will help keep purchases of new residential construction from declining.

The Final Demand PPI is not one of the more closely watched indicators for inflation. However, the April numbers should offer the FOMC some evidence that its assessment of first quarter inflation being restrained by a few transitory factors is correct.

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