Margin Mirage: August PPI’s -0.1% Headline Hides a 0.3% Core and an 11‑Month Pipeline Grind

The official release on 2025-09-10 says producer prices “edged down” 0.1% in August. That’s technically true—and deeply misleading. Under the hood, the core gauge (final demand less foods, energy, and trade services) rose 0.3% for a fourth straight month, with the 12‑month rate accelerating to 2.8%, its highest since March 2025. Translation: the “cooling” headline is a trade margin story, not a cost story, and the pipeline is heating—not easing.

- Headline -0.1% vs core +0.3% (fourth straight rise); core 12‑month: +2.8%—largest since March 2025.
- Services -0.2% is a margin tale: trade services -1.7% pulled it down; transport/warehousing +0.9%, and services ex-trade/transit +0.3%.
- Goods +0.1% (foods +0.1%, energy -0.4%, goods ex-FE +0.3%) shows sticky costs—tobacco +2.3%, aluminum mill shapes +5.5%, plus electric power, beef/veal, printed circuit assemblies.
- Pipeline pressure firming: processed intermediate goods +0.4% (fifth straight), stage 4 +0.5% (eleventh straight); several 12‑month measures hit their largest since early 2023.
- High revision risk where it matters: the August dip relies on volatile trade margins, after April–July series were revised.

The Margin Mirage
August’s -0.1% final demand downtick hinges on trade services margins -1.7%, with machinery and vehicle wholesaling down -3.9%. That’s a price-setting story, not input-cost relief. Meanwhile, the engine room kept humming:
- Core +0.3% for the fourth month; 12‑month +2.8%.
- Services ex-trade/trans/warehousing +0.3%.
- Transportation and warehousing +0.9%.
The press line emphasizes “services down.” The composition says “non‑trade services and logistics up.”

Goods: Sticky Under the Hood
Final demand goods +0.1% masks a firm goods ex-foods & energy +0.3%. Notable risers: tobacco +2.3%, printed circuit assemblies, electric power, beef/veal, and processed poultry. Energy slid -0.4% (utility natural gas -1.8%, crude petroleum -2.8%), but that relief is offset by industrial and electrical cost lines that don’t care what crude did this month.

Pipeline Pressures: Stage 4 Won’t Quit
The upstream picture contradicts any “easing” takeaway:
- Processed intermediate goods +0.4% in August, fifth straight; 12‑month +2.6%, largest since January 2023.
- Unprocessed intermediate goods -1.1% m/m, but 12‑month +3.0%, largest since March.
- Intermediate services +0.3% m/m; 12‑month +2.1%, largest since April.
- By production flow: Stage 4 +0.5% (eleventh consecutive increase), with goods inputs +0.4% and services inputs +0.6%; Stage 3 +0.2% (12‑month +2.5%, largest since January 2023).
When late‑stage inputs rise on both goods and services, pass‑through risks are not going away.

Revisions: The Headline Lives on the Edge
April–July revisions hit final demand, intermediate, and stage indexes—the same places propping up August’s “cooling” story via trade margins. Margin series are historically volatile and revision‑prone. If something is going to move on second print, it’s this. Conversely, the persistent core and intermediate firmness looks entrenched.

Monthly Snapshot

12‑month: Final demand +2.6%, Core +2.8% (largest since March 2025).

Narrative vs Reality
- “Edged down” headline vs firming core: four consecutive core gains, accelerating 12‑month inflation.
- “Services weak” vs composition strong: margin-led decline hides +0.9% transport/warehousing and +0.3% in other services.
- “Energy relief” vs sticky goods ex‑FE +0.3% and industrial components rising.
- “Easing pressures” vs pipeline firming: Stage 4’s eleventh increase is not a cooling signal.

Industry Pressure Points (August)
- Upward: Aluminum mill shapes +5.5%, tobacco +2.3%, electric power, fabricated structural metal products, printed circuit assemblies, beef/veal, processed poultry, nonresidential real estate services +2.1%, portfolio management, truck freight, co‑employment staffing.
- Downward: Utility natural gas -1.8%, crude petroleum -2.8%, grains, ungraded chicken eggs, raw milk, copper base scrap, chemicals & allied products wholesaling margins, television ad time, data processing services.

Market Implications
- Equity sectors:
- Industrials/Logistics: +0.9% in transport/warehousing and rising truck freight support revenue tailwinds, but cost pass‑through is key.
- Semis/Electronics supply chain: printed circuit assembly prices rising—margin pressure for hardware makers; potential upside for upstream component suppliers.
- Materials/Metals: aluminum +5.5% and fabricated metals strength point to sustained input inflation; watch capital goods pricing.
- Staples/Protein: beef/veal and processed poultry firming suggests grocery margin pressure unless pricing power holds.
- Bonds/Rates: Persistent core + pipeline pressures complicate a “disinflation is done” trade. Curve steepening risk if pass‑through hits CPI and services PCE.
- Energy & Transport: Energy down -0.4% helps at the margin, but diesel/transport dynamics keep logistics costs supported; not the relief headline implies.

Looking Ahead
- Watch for pass‑through: The combination of Stage 4 +0.5%, processed intermediates +0.4%, and goods ex‑FE +0.3% argues for stickier CPI components into autumn.
- Revisions risk the headline: With April–July already revised and August hinging on trade margins -1.7%, odds favor upward tweaks to the headline rather than downshifts in core.
- Breadth over noise: If September keeps core at +0.3% and stage indexes positive, the narrative will have to catch up to the data.
- Focus triggers next month: machinery/vehicle wholesaling margins (volatility check), transport/warehousing breadth, aluminum and fabricated metals, and utility power pricing.

Conclusion
The 2025-09-10 release sold a -0.1% headline dip. The ledger shows core +0.3%, core 12‑month +2.8%, goods ex‑FE +0.3%, transport/warehousing +0.9%, and an eleven‑month climb at Stage 4. That’s not cooling—that’s containment theater via trade margins.