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Economy in Brief

PPI Rose A Moderate 0.4%, Core Pricing Calmer
by Tom Moeller March 22, 2005

The Producer Price Index for finished goods rose 0.4% last month versus Consensus expectations for a 0.3% rise. The gain equaled the average of the prior twelve months. Excluding food & energy prices rose 0.1%, calmer than the 0.8% spike in January and equaled Consensus expectations.

The PPI for core finished consumer goods rose 0.2% (2.8% y/y) after the prior month's 0.9% jump. Prices for tobacco products again were strong and rose 0.5% (3.7% y/y) but consumer durable prices fell 0.5% (2.3% y/y) due to lower prices for passenger cars. Capital goods prices fell 0.2% (+2.8% y/y).

Finished energy prices rose 1.4% (11.9% y/y) due to higher gasoline prices (23.7% y/y) and higher fuel oil prices (46.0% y/y). Finished food prices jumped 0.8% (+4.9% y/y).

Intermediate goods prices nearly doubled the prior month's increase and rose 0.7%. Core intermediate prices again were firm and rose 0.5%, led higher by a 6.1% (10.8% y/y) increase in prices for softwood lumber.

Crude prices fell 1.6%, down for the third straight month as core crude prices dropped 3.0%. Prices for iron & steel scrap flopped 7.1% (-3.5% y/y). During the last thirty years "core" crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.

Producer Price Index Feb Jan Y/Y 2004 2003 2002
Finished Goods 0.4% 0.3% 4.7% 3.6% 3.2% -1.3%
  Core 0.1% 0.8% 2.8% 1.5% 0.2% 0.1%
Intermediate Goods 0.7% 0.4% 8.4% 6.6% 4.6% -1.5%
  Core 0.5% 0.8% 8.1% 5.7% 2.0% -0.5%
Crude Goods -1.6% -2.0% 8.1% 17.6% 25.1% -10.6%
  Core -3.0% -2.5% 5.1% 26.5% 12.4% 3.8%
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