Margin Growth Ahead
Macro
Sept PPI suggesting Gross Margin Acceleration
On 25Nov2025 we finally got the Sept PPI data. The points to an acceleration of margin growth.
Red Line: PPI Stage 4 minus PPI Stage 2
- Stage 4 are prices close to the end user
- Stage 2 are prices near the source
- Gap gives a sense of price margins (i.e. Price of Output minus Price of Input)
Blue Line: GDP / Gross Output
- GDP is a proxy for nominal gross profits
- Gross output is a proxy for revenues
- The ratio is a measure of aggregate gross profit margins
The recent PPI movements suggest input price deflation while businesses are able to maintain some pricing power further downstream.