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Economy in Brief

November PPI Gain the Largest Since 1974
by Tom Moeller December 19, 2006

The producer price index for finished goods surged 2.0% last month and far surpassed Consensus expectations for a 0.6% rise. It was the largest one month increase since 1974 and reflected higher energy & nonenergy prices. The core PPI jumped a surprising 1.3% and easily beat Consensus expectations for a 0.2% uptick with the largest m/m increase since 1980.

Finished energy goods prices recovered all of the prior month's decline with a 6.1% (-1.8% y/y) increase. Gasoline prices jumped 17.9% (3.5% y/y) after three months of sharp decline and fuel oil prices surged 7.7% (6.1% y/y). Natural gas prices also recovered most of their October drop with a 5.9% (-14.1% y/y) increase.

Finished consumer goods prices less food & energy jumped 1.1% (1.7% y/y) after the 0.8% October decline and the rise was led by a 2.2% (-0.7% y/y) increase in passenger cars. Furniture prices rose 0.2% (2.5% y/y) for the second month.

The 1.4% (2.2% y/y) surge in capital equipment prices followed a 0.9% October decline and reflected a 13.6% (0.7% y/y) recovery in light truck prices which had plunged 9.7% during the prior month.

Intermediate goods prices increased 0.7% but prices less food & energy fell 0.3% reflecting a huge 4.4% (+12.2% y/y) decline in steel mill products prices.

The crude materials PPI recovered all of the prior months decline with a 15.7% surge as natural gas prices nearly doubled m/m (-35.1% y/y). Plywood & timber prices surged 5.0% (7.5% y/y) and aluminum base scrap rose 2.7% (28.8% y/y).

Producer Price Index November October Y/Y 2005 2004 2003
Finished Goods 2.0%  -1.6%   0.9%   4.9%  3.6%  3.2%
  Core 1.3% -0.9%  1.8% 2.4% 1.5% 0.2%
Intermediate Goods 0.7% -1.1% 2.6%  8.0% 6.6% 4.7%
  Core -0.3% 0.0% 5.1%  5.5% 5.7% 2.0%
Crude Goods  15.7%  -10.5%  -8.5% 14.6%  17.5% 25.1%
  Core 0.5% -1.3%  17.8% 4.8%  26.5% 12.4%
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