Bloomberg News

First Trust’s Stein Says Natural-Gas Prices Help Forecast PPI

Published on Bloomberg Terminal on September 12, 2009

By Ken Prewitt and Tania Haas
Sept. 12 (Bloomberg) — Robert Stein, senior economist at First Trust Advisors, discusses producer prices. Prices paid to U.S. producers fell in August for the first time this year, as lower energy costs eased inflation pressures. The 0.9 percent drop was more than forecast and followed a 1.2 percent increase in July, U.S. Labor Department figures showed today. So-called core producer prices that exclude fuel and food rose 0.2 percent, matching forecasts.
Stein spoke in an interview from Lisle, Illinois.

On what he saw in natural gas that other economists missed:
“Other economists tend to ignore the natural-gas price, or not give it enough weight when trying to forecast producer prices. And in particular, you don’t just do the most recent month’s change in natural gas, you use the last two months. That seems to give you more texture in terms of the forecasting ability.
“We’ve seen a 35 percent decline in natural-gas prices over the past two months, and that led us to believe that producer prices would go down by 9-10ths. And there’s frankly a little luck in here, too, so we can’t discount that.”

–With reporting by Alberto Riva in New York. Editors: EricMorse, Stefanie Batcho-Lino