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Economy in Brief

PPI Moderate, As Expected
by Tom Moeller April 18, 2006

The finished goods producer price index for March rose a moderate 0.5% following the unrevised 1.4% decline one month earlier. Consensus expectations had been for a 0.4% gain.

Less food & energy the PPI (core) also was moderate and increased 0.1%, half the expected rise. Durable consumer goods rose 0.1% (0.5% y/y) for the second consecutive month and nondurables prices continued weak due to declines in apparel prices & textile house furnishings. Prices of all finished consumer goods less food & energy rose 0.2% (1.9% y/y) for the second month and core consumer nondurable goods prices increased 0.2% (2.9% y/y), half the prior month's increase.

Capital equipment prices increased just 0.1% (1.4% y/y) for the second consecutive month.

Finished energy prices during March increased 1.8% (15.6% y/y) as gasoline prices jumped 9.1% (22.2% y/y) but home heating oil fell for the third straight month, down 3.6% (+15.2% y/y) along with natural gas prices which dipped another 0.5% (+22.3% y/y). Residential electric power costs fell 0.7% (+7.9% y/y).

The Short-Term Energy and Summer Fuels Outlook from the US Energy Information Administration can be found here. Also available is the U.S. Energy Prices: Base Case.

Intermediate goods prices fell for the second consecutive month. Core intermediate prices also were tame and rose just 0.1% following the 0.5% surge during February.

Crude goods prices dropped sharply again due to lower energy prices, which fell 4.5%. This month, however, crude oil prices have backed up with the price of WTI crude oil yesterday at $70.41 per barrel versus the March average of $62.90. Core crude prices were strong last month and rose 0.8% due to continued strength in prices for copper base scrap (57.6% y/y), aluminum scrap (25.5% y/y) and iron & steel scrap (10.7% 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 Mar Feb Y/Y 2005 2004 2003
Finished Goods 0.5% -1.4% 3.5% 4.9% 3.6% 3.2%
  Core 0.1% 0.3% 1.7% 2.4% 1.5% 0.2%
Intermediate Goods -0.1% -0.3% 7.0% 8.0% 6.6% 4.7%
  Core 0.1% 0.5% 4.5% 5.5% 5.7% 2.0%
Crude Goods -2.7% -9.2% 4.9% 14.7% 17.5% 25.1%
  Core 0.8% 3.3% 13.2% 4.8% 26.5% 12.4%
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