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US PPI Sees Significant Surge in August, Led by Gasoline and Energy

By:
James Hyerczyk
Updated: Sep 14, 2023, 14:53 UTC

The U.S. PPI for August 2023 rose 0.7%, with 80% due to a 2.0% spike in final demand goods, driven by a 20.0% surge in gasoline prices.

PPI FACTORY

PPI Highlights

  • PPI rises 0.7% in August, surpassing July’s 0.4%.
  • Core PPI meets expectations.
  • Gasoline prices soar by a staggering 20.0%.

PPI Overview

The U.S. Bureau of Labor Statistics has released the Producer Price Index (PPI) for August 2023, revealing a notable uptick. This increase follows a more moderate rise in July, with final demand goods witnessing a significant surge.

Producer Price Dynamics

In August, the seasonally adjusted PPI for final demand escalated by 0.7%, compared to a 0.4% hike in July. This is the most substantial rise since the 0.9% increase in June 2022. Comparatively, the unadjusted 12-month rate ending in August showed a 1.6% growth. Traders were looking for a 0.4% reading.

Core PPI rose 0.2%, meeting expectations while coming in lower than the previously reported 0.3%.

Goods vs. Services

A lion’s share (80%) of the increase in the PPI is due to a 2.0% surge in the index for final demand goods. A striking 10.5% leap in final demand energy prices largely influenced this. On the other side, final demand services saw a more modest 0.2% growth. Interestingly, while the index for final demand goods less foods and energy rose marginally by 0.1%, prices for final demand foods dipped by 0.5%.

Key Influencers

Gasoline prices, having skyrocketed by 20.0%, were the primary drivers behind the jump in the index for final demand goods in August. Other contributors included diesel fuel, jet fuel, beverages, and iron and steel scrap. On the downside, prices for fresh and dry vegetables plunged by 11.5%. The service segment witnessed a boost primarily from a 1.1% hike in the residential real estate services index. However, margins for chemicals and allied products wholesaling sank by 4.7%.

Retail Sales Highlights

  • August 2023 sales hit $697.6 billion, up 0.6% MoM.
  • Gasoline stations decline 10.3% YoY.
  • Food services surge 8.5% since August 2022.

Retail Sales Overview

The U.S. retail and food services sectors experienced a positive trajectory in August 2023, registering a rise of 0.6% compared to July 2023, reaching a robust $697.6 billion. This growth reflects an increase of 2.5% from August 2022. Core Retail Sales came in at 0.6%, better than the 0.4% forecast.

Comparative Growth

Delving into a broader timeframe, the sales figures for the period between June and August 2023 indicate a 2.2% enhancement compared to the same span in 2022. Notably, the growth rate for the June to July 2023 interval was recently revised downward from the initially reported 0.7% to a more accurate 0.5%.

Retail Sales Insights

Retail trade, a significant component of the overall figure, matched the general trend with a 0.6% increment from July 2023, reflecting a year-on-year growth of 1.6%.

Sectoral Highlights

Gasoline stations witnessed a considerable contraction, recording a decline of 10.3% from last year’s figures. In stark contrast, food services and drinking establishments have made impressive strides, boasting an 8.5% surge since August 2022.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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