September PPI Posts Eleventh Consecutive Double-Digit Increase In Core Costs

In Jefferies & Company's Consumer Products Weekly report, the company discussed the September Producer Price Index (PPI), which posted an eleventh consecutive double-digit increase in core costs. Unlike the previous four months, the rate of increase accelerated sequentially. “Our proxy for core costs, Crude Non-Food Materials less Energy, reversed course and showed accelerating inflation, increasing 25.2% year-over-year compared to 21.2% in August and 25.0% in July,” Jefferies & Company writes. “Additionally, pricing accelerated from August levels and remains the strongest it has been in the past year. Our proxy for core pricing, Finished Consumer Goods less Food and Energy, rose 2.2% year-over-year in September, up +0.3 percentage points from August levels.” However, Jefferies adds, because the increase in the rate of cost inflation outpaced prices increases, the price/cost gap widened for the first time since April. “With the economy and commodity cost environment still very tenuous at present, we continue to believe that the direct sellers, with their strong emerging market exposure and high gross margins, are the best positioned in the Group.”