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Economy in Brief

PPI Up Expected 0.9%, Core Tame
by Tom Moeller May 16, 2006

The April finished goods producer price index jumped 0.9%. That was the largest gain since a 1.4% spike last September but it about matched Consensus expectations had been for a 0.8% rise.

Less food & energy the (core) PPI increased 0.1% last month and fell short of expectations for a 0.2% rise. Durable consumer goods prices were unchanged (0.3% y/y) following two months of 0.1% increase and core consumer nondurable prices rose 0.1% (2.6% y/y) following three months of stronger gain. Apparel prices continued lower. Prices of all finished consumer goods less food & energy rose 0.1% (1.6% y/y).

Capital equipment prices rose 0.2% (1.4% y/y) after two months of 0.1% gains.

Finished energy prices jumped 4.0% (17.8% y/y) as gasoline prices increased 12.3% (33.9% y/y) and home heating oil rose 13.7% (27.6% y/y). A 3.0% decline in natural gas prices (+12.4% y/y) was the third consecutive monthly drop.

Intermediate goods prices jumped 0.9% on higher energy prices which rose 2.8% (18.4% y/y). Core intermediate prices increased 0.4%.

Crude goods prices regained about half of the prior month's decline with a 1.2% increase. Energy prices rose 1.3% higher crude oil prices were offset by lower prices for natural gas. Core crude prices, however, were notably strong and posted a 4.7% gain and are up 8.4% year to date. Copper base scrap (59.1% y/y), aluminum scrap (28.7% y/y) and iron & steel scrap (8.7% y/y) all continued strong. 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 April Mar Y/Y 2005 2004 2003
Finished Goods 0.9% 0.5% 4.0% 4.9% 3.6% 3.2%
  Core 0.1% 0.1% 1.5% 2.4% 1.5% 0.2%
Intermediate Goods 0.9% -0.1% 7.3% 8.0% 6.6% 4.7%
  Core 0.4% 0.1% 4.9% 5.5% 5.7% 2.0%
Crude Goods 1.2% -2.7% 3.3% 14.6% 17.5% 25.1%
  Core 4.7% 0.8% 16.0% 4.8% 26.5% 12.4%
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