Producer Price Index:  The U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) for final demand grew 0.7% in August 2021, following the 1.0% increase in July. Prices for final demand services grew 0.7% while the index for final demand goods moved up by 1.0%. The final demand index moved up by 8.3% for the 12-month period ending in August, which was the largest advance since the 12-month data were first collected in November 2010.

Figure 1 shows the PPI for materials and components of construction, with the three-month moving average (3MMA) on the left-hand axis and monthly percent change of the 3MMA on the right. August’s 3MMA was 306.97, representing a change of +1.25% month over month (m/m). We now see the index making huge gains in 2021 following the price volatility brought on by Covid-19.

Figure 2 shows the PPI for materials and components of manufacturing, with the 3MMA on the left-hand axis and monthly percent change of the 3MMA on the right. August’s 3MMA was 224.47, representing a change of +1.91% m/m. Like the construction index, we see steady gains in manufacturing since mid-2020.

One-third of the August advance in the index for processed goods for intermediate demand – which includes the materials and components of both construction and manufacturing – can be traced to prices for industrial chemicals, which rose 4.9 percent. The indexes for steel mill products; meats; structural, architectural, and pre-engineered metal products; plastic products; and industrial electric power also moved higher. In contrast, diesel fuel prices decreased 1.6 percent. The indexes for softwood lumber and for natural, processed, and imitation cheese also declined.

At Gerdau, we monitor the PPI – issued monthly by the U.S. Bureau of Labor Statistics – because it is an unbiased, reliable measure of inflation. The PPI can better inform business decisions by providing a framework for contract adjustment, forecasting, inventory valuation, and as an overall economic indicator.