PPI Higher Than Expected, But Less Worrisome In The Core Details

A higher-than-expected September PPI contained details that look less inflationary from a core perspective as we head to Thursday's CPI:

• The 0.5% M/M rise was higher than the 0.3% estimate (+0.7% prior), with ex-food and energy +0.3% vs 0.2% expected (+0.2% prior). Ex-food, energy, and trade services printed 0.2% M/M for the 2nd consecutive month (upon revision from 0.3% for August).
• Most of the increase in goods can largely be discounted from a core PCE / CPI perspective - 3/4 of the increase is due to the rise in energy prices (which pulled back sharply from 10.3% in Aug) as expected to be mirrored in the CPI release tomorrow. The jump in goods to a 10-month high +0.9% M/M was more concerning in this regard.
• Final demand services were up 0.3%, but the BLS notes that a major factor was a 13.9% jump in the index for "deposit services" (which had been negative the prior 2 months) - there's no explanation of this in the release but it's imputed from interest rate spreads.
• Looking at the PCE categories. Airline passenger services (which are used in PCE as airfares, and not the CPI reading out tomorrow) fell by the most since April, -2.1% M/M.
• Health care services ticked a little higher unrounded but were steady rounded at 0.1% M/M; health and medical insurance prices pulled back sharply to 0.2% from 0.5% prior.
• Insurance costs overall though pulled back to 0.2% M/M from 0.3% prior; auto insurance costs notably ticked higher.