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Economy in Brief

Finished Producer Prices Up Slightly
by Tom Moeller October 15, 2004

In September the finished goods PPI rose 0.1% and matched Consensus expectations. The gain followed slight decline in two of the prior three months. Less food & energy prices were a bit stronger, up 0.3%, versus expectations for a 0.2% rise.

"Core" finished consumer goods prices jumped 0.4% (2.0% y/y) on the strength of higher durable & nondurable goods prices.
Finished capital goods prices also registered a firm 0.4% (1.8% y/y) gain reflecting strength in prices of textile machinery as well as ships.

Finished energy prices fell 0.9% (9.1% y/y). Residential gas prices dropped a not seasonally adjusted 2.4% (5.7% y/y) but they have recovered in October.Gasoline prices rose a not seasonally adjusted 1.9% m/m (+18.9% y/y).

Crude prices less food & energy reversed some of the prior month's strength with a 2.5% decline. 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. Overall crude prices fell 4.2%, dragged lower by the 6.6% decline in crude energy costs.

Intermediate goods prices ticked just 0.1% higher but core intermediate prices added 0.7% to the 1.0% August jump. Industrial chemical prices continued strong.

Producer Price Index Sept Aug Y/Y 2003 2002 2001
Finished Goods 0.1% -0.1% 3.3% 3.2% -1.3% 2.0%
  Core 0.3% -0.1% 1.9% 0.2% 0.1% 1.4%
Intermediate Goods 0.1% 1.0% 8.3% 4.7% -1.5% 0.4%
  Core 0.7% 1.0% 7.8% 2.0% -0.5% -0.1%
Crude Goods -4.2% -0.7% 14.2% 25.1% -10.6% 0.3%
  Core -2.5% 4.5% 25.4% 12.4% 3.8% -10.0%
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