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Economy in Brief

U.S. PPI Above Forecasts; Weak Core Prices As Expected
by Tom Moeller August 14, 2007

Finished producer prices rose 0.6% last month, twice the Consensus forecast for a 0.3% rise. That followed a 0.2% decline during June. The increase raised the y/y gain in prices to 3.9%, its highest in a year.

The core finished goods PPI increased a modest and expected 0.1%, down from the 0.3% gain in June. The increase was a bit below the average monthly increase of 0.2% so far this year.

Energy prices surged 2.5% as gasoline prices jumped 5.1% (6.4% y/y) and fuel oil prices rose 1.1% (1.6% y/y).Natural gas prices also were strong and posted a 3.2% (9.0% y/y) gain.

Food prices fell 0.1% (+6.2% y/y) following the 0.8% jump during June. Lower prices for meat and pork offset higher costs for dairy products.

Finished consumer goods prices less food & energy rose 0.2% (2.4% y/y). Passenger car prices reversed the strong June gain with a 1.2% decline (+1.1% y/y) and household furniture prices also fell a modest 0.1% (NSA,+1.4% y/y).

Capital equipment prices fell 0.2% (+2.3% y/y) after a 0.1% uptick in June. Prices of light motor trucks fell and costs of heavy trucks were unchanged (6.8% y/y) for the third consecutive month.

Intermediate goods prices were firm again and rose 0.6% after a 0.5% June rise. Food prices were strong with a 0.8% (15.3% y/y) jump. The index excluding food & energy prices rose 0.2% (2.5% y/y).

The crude materials PPI jumped 1.2% due to the 11.8% rise in crude oil prices (-3.2% y/y). The core crude materials PPI was unchanged as most metal prices fell.

Inflation Dynamics, remarks by Federal Reserve Board Governor Frederic S. Mishkin, are available here.

Producer Price Index July June Y/Y 2006 2005 2004
Finished Goods 0.6% -0.2%    3.9%  2.9%  4.9%  3.6% 
  Core 0.1% 0.3%  2.4% 1.4% 2.4% 1.5%
Intermediate Goods 0.6% 0.5% 3.9% 6.4%  8.0% 6.6%
  Core 0.2% 0.4% 2.5% 6.0%  5.5% 5.7%
Crude Goods 1.2%  0.3%   13.2% 1.4% 14.6%  17.5%
  Core 0.0% -0.2%  8.5% 20.9% 4.9%  26.5%
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