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Economy in Brief

Lower Energy Prices Ease U.S. PPI; Core Prices Firm
by Tom Moeller July 17, 2007

The producer price index for finished goods fell 0.2% last month following its 0.9% rise in May. The decline compared to Consensus forecasts for a 0.1% increase and it was the first decline since January.

Food prices fell 0.8% (+6.3% y/y) after May's 0.2% dip.

Energy prices, in addition, declined a sharp 1.1% (+4.3% y/y) as gasoline prices fell 3.9% (+3.8% y/y).Fuel oil dipped 0.5% (-0.6% y/y/y) but natural gas prices increased a hefty 2.6% (6.8% y/y), the firmest y/y increase since June 2006.

The core finished goods PPI increased 0.3%, bit more than the 0.2% May rise but the last two increases followed two months of unchanged readings during March and April. Consensus estimates were for a 0.2% increase in June.

Finished consumer goods prices less food & energy rose 0.3% (1.7% y/y) as passenger car prices rose 0.9% (-1.8% y/y) after an unchanged reading during May.

Capital equipment prices increased 0.2% (1.8% y/y) after unchanged prices during the prior two months. Most of the June increase was due to a 1.0% (0.8% y/y) in prices of light motor trucks.

Intermediate goods prices added 0.5% to the firm 1.1% increase during May.Intermediate food prices rose a large 1.6% (15.3% y/y), suggesting future strength in finished food prices. The index excluding food & energy prices rose the same 0.4% (2.7% y/y) as it did during May.

The crude materials PPI rose 0.3% (14.9% y/y), as energy prices rose 0.6% (8.5% y/y) and food prices rose 0.5% (27.1% y/y). The core crude materials PPI fell 0.2% (10.2% y/y) as copper scrap prices fell 6.6% NSA (+9.6% y/y) and aluminum scrap prices fell 2.3% NSA (-3.3% y/y).

Producer Price Index June May Y/Y 2006 2005 2004
Finished Goods -0.2 0.9%    3.2%  2.9%  4.9%  3.6% 
  Core 0.3 0.2%  1.8% 1.4% 2.4% 1.5%
Intermediate Goods 0.5% 1.1% 3.4% 6.4%  8.0% 6.6%
  Core 0.4% 0.4% 2.7% 6.0%  5.5% 5.7%
Crude Goods 0.3%  2.0%   14.9% 1.4% 14.6%  17.5%
  Core -0.2% 0.1%  10.1% 20.9% 4.9%  26.5%
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