Producer Price Index:  The U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) for final demand grew 1.0% in July 2021. Pricing for services grew 1.1% while pricing for goods increased 0.6%. The final demand index moved up by 7.8% for the 12-month period ending in July.

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. We now see the index making huge gains in 2021 following the price volatility brought on by the Covid-19 pandemic.

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. Similar to the construction index, we see steady gains in manufacturing prices since mid-2020, following price declines brought on by Covid-19.

Nearly one-fifth of the July advance in the index for processed goods for intermediate demand – which includes materials and components of both construction and manufacturing – can be traced to a 22.9% increase in prices for cold rolled steel sheet and strip. The indexes for natural gas to electric utilities, diesel fuel, hot rolled steel sheet and strip, gasoline, and steel pipe and tube also moved higher.

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.