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Economy in Brief

U.S. PPI Fell Sharply; Core Prices Tame, Food Down, Oil Cratered
by Tom Moeller September 18, 2007

Finished producer prices fell 1.4%, the most for any month since October of last year. That followed a 0.6% increase during July and dropped the year to year percent change to 2.1%, its lowest since January. A 0.3% decline had been expected for August.

Food prices fell 0.2% (+4.7% y/y) for the fourth consecutive monthly decline led by lower prices for pork.

Energy prices cratered 6.6% after the 2.5% surge during the prior month. Gasoline prices fell 13.8% (-5.7% y/y) and home heating oil prices fell 6.0% (-4.5% y/y).Natural gas prices reversed the prior month's strength with an 8.5% decline (-4.5% y/y).

The core finished goods PPI increased a moderate 0.2% which was double the expected 0.1% uptick. The increase matched the average monthly rise of 0.2% so far this year.

Passenger car prices increased 0.5% but household furniture prices fell a modest 0.2% for the second monthly decline.

Capital equipment prices rose 0.1% for the second consecutive month. the modest increase led by a 0.9% decline in prices of light motor trucks.

Intermediate goods prices dropped 1.2% as the index excluding food & energy prices fell 0.5%, the first m/m decline since last November.

The crude materials PPI reversed all of the prior month's increase with a 3.0% drop as food prices fell 1.4%, reversing all of the prior month's increase. The core crude materials PPI jumped 1.4% on the strength of iron & steel scrap prices.

Producer Price Index August July Y/Y 2006 2005 2004
Finished Goods -1.4% 0.6%    2.1%  2.9%  4.9%  3.6% 
  Core 0.2% 0.1%  2.2% 1.4% 2.4% 1.5%
Intermediate Goods -1.2% 0.6% 2.2% 6.4%  8.0% 6.6%
  Core -0.5% 0.2% 2.5% 6.0%  5.5% 5.7%
Crude Goods -3.0%  1.2%   13.2% 1.4% 14.6%  17.5%
  Core 1.3% 0.0%  13.8% 20.9% 4.9%  26.5%
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