The PPI was mostly flat. What does this say about the economy?

The producer price index, which measures inflation at the wholesale level, is expected in September. Core inflation rose more than analysts expected as services price growth rose 0.2% and goods price growth fell 0.2% from August.

These are not gigantic numbers, so they don’t ring any alarm bells among economists. But averages can sometimes obscure the more noticeable trends.

Given the overall numbers, Matthew Martin, senior U.S. economist at Oxford Economics, is optimistic. He said the fact that final demand was largely stagnant “really shows the story of a really stable economic environment, which is ultimately what the Fed is after.”

However, this report is about two big topics: goods and services. Martin said rising commodity prices have stabilized and are right where they should be. Price increases for services take a little longer to arrive.

“Core goods are at 2%, core services are at 4%, so services in general have been the really tricky side of things,” he said.

Martin said the Federal Reserve wants the number of services to decline. And the fact that the number of services has increased is not a step in the right direction.

“And it’s actually rising faster than in September, October 2023,” said Daniel Lacalle, chief economist at investment bank Tressis. “The services indicators show a very hot economy, probably hotter than anyone would like.”

The other major drag on the index is the recent collapse in energy prices – particularly gasoline and diesel.

Chief economist Ken Simonson of the Associated General Contractors of America said the decline made construction appear more affordable, even though copper and lumber prices rose last month.

“So I don’t want to give the impression that everything is quiet or that prices are going down,” he said.

Those numbers are also from a month ago, Simonson said, and a lot has happened since then.

“We had some pretty dramatic events that could potentially impact costs: two hurricanes and a brief port strike,” he said.

But he also said that these prices are still only those that producers pay. And he hopes that this month’s dips and spikes will be so small that they won’t be too noticeable to consumers, at least in the short term.