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Economy in Brief

Finished Producer Prices Decline
by Tom Moeller September 10, 2004

The finished goods PPI fell 0.1% in August versus Consensus expectations for a 0.2% rise.Producer prices less food & energy also declined 0.1% versus expectations for a 0.1% gain.

Finished energy prices inched just 0.2% higher (10.0% y/y) following a 2.3% advance in July. Gasoline prices fell a not seasonally adjusted 5.1% m/m (+20.6% y/y) and residential gas prices rose 0.1% (8.8% y/y).

Prices of finished consumer goods less food & energy fell 0.2% (1.6% y/y).
Finished capital goods prices fell 0.1% (1.4% y/y).

More fireworks were provided in the report that crude prices less food & energy rose 4.5% on top of an 8.6% July increase. During the last thirty years "core" crude prices have been a fair indicator of activity in the industrial sector. There has been a 51% correlation between the six month change in core crude prices and the change in factory sector industrial production.

Intermediate goods prices were strong again showing a 1.0% gain following a 0.8% rise in July. Core intermediate prices doubled the July increase with a 1.0% spurt in August that reflected a 5.7% (NSA, 19.5% y/y) m/m jump in industrial chemical prices.

Producer Price Index Aug July Y/Y 2003 2002 2001
Finished Goods -0.1% 0.1% 3.4% 3.2% -1.3% 2.0%
  Core -0.1% 0.1% 1.5% 0.2% 0.1% 1.4%
Intermediate Goods 1.0% 0.8% 8.1% 4.7% -1.5% 0.4%
  Core 1.0% 0.5% 7.3% 2.0% -0.5% -0.1%
Crude Goods -0.7% -0.2% 22.4% 25.1% -10.6% 0.3%
  Core 4.5% 8.6% 32.1% 12.4% 3.8% -10.0%
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