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Producer Price Index Drops 0.1% on Tighter Retail Margins

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The Producer Price Index (PPI) for final demand fell a seasonally adjusted 0.1% for February, according to a Labor Department report (link opens as PDF) released today.

"Final demand" is a more comprehensive indicator than that for finished goods alone. It includes goods, services, and construction sold for personal or government use, capital investment, and export.

After increasing 0.2% for January, a 0.3% decline in final demand services helped push February's PPI lower. Analysts had expected another month of 0.2% growth. 

Source: Labor Department 

Diving deeper, a sharp 1% drop in final demand services trade was the main source of this month's price decrease. Trade indexes measure the change in margins received by wholesalers and retailers. According to the Labor Department, more than 80% of this month's margin tightening came from apparel, footwear, and accessories retailing, which fell 9.3%.

While prices for final demand goods increased a relatively smaller 0.4%, the biggest push came from prices for pharmaceutical preparations, up 0.9% for February.

Excluding more volatile food and energy prices, the overall index pulled down an even greater 0.2% -- analysts had expected a 0.1% bump.

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