Demand for services had been holding up producer prices but not for the last two reports.

PPI-FD fell an unexpected 0.4 percent in October.

Year-on-year, prices are down a very sizable 1.6 percent.

Services prices fell 0.3 percent in October following what was then an unexpected 0.4 percent decline in September. Year-on-year, services prices are up only 0.1 percent. Services are supposed to be insulated from global effects including price effects, and the downturn for this reading does not point to 2 percent target inflation anytime soon.

Energy prices were unchanged in the month but are down very sharply year-on-year, at 21.5 percent. Food prices fell 0.8 percent for a 4.2 percent year-on-year decline. Excluding food and energy, prices fell 0.3 percent for a second straight month with the year-on-year reading at plus 0.1 percent. Excluding food, energy & services, prices fell 0.1 percent with the year-on-year at plus 0.4 percent.

Finished goods readings are also very weak, down a total 0.3 percent in the month for a 4.1 percent year-on-year decline. Export prices fell 0.3 percent for a 3.7 percent on year decline.

This report, like import & export prices released earlier this week, is soft throughout and does not point to any pressure for the consumer price report. The employment side of the Fed’s mandate may be showing pressure, but not prices, at least not yet.