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Economy in Brief

U.S. PPI Strong, Core Weak
by Tom Moeller October 12, 2007

Finished producer prices rose 1.1% last month and recouped virtually all of the 1.4% decline during August. The increase, led by higher food & energy prices, topped consensus expectations for a 0.4% rise.

Energy prices were strongest and surged 4.1% after the prior month's 6.6% drop. Gasoline prices jumped 8.4% (21.6% y/y) after a 13.8% August drop and natural gas prices rose 3.2% (1.5% y/y).Home heating oil prices increased 2.0% (8.9% y/y.

Food prices jumped 1.5% (5.8% y/y) after four consecutive months of decline. Much higher prices for beef, eggs and fresh fruit led the advance last month.

The core finished goods PPI increased a modest 0.1% which was half the expected 0.2% rise. The three month change of 0.4% was its lowest since May.

A 0.5% increase in household furniture prices was offset by a 1.8% decline in passenger cars.

Capital equipment prices also fell 0.1% after two months of 0.1% increases. Prices for light motor trucks fell 0.5% and civilian aircraft prices rose just 0.3%.

Intermediate goods prices made up a piece of the prior month's 1.2% decline with a 0.4% increase. The index excluding food & energy prices rose a small 0.1% as prices for steel mill products fell another 1.2%.


The crude materials PPI rose just 0.1%, the weakness due to a 2.0% decline in energy led by lower natural gas prices. The core crude materials PPI jumped 1.6% after a 1.3% August increase. Iron & steel scrap prices surged 5.8%.

John Taylor's Contributions to Monetary Theory and Policy are today's remarks by Fed Chairman Ben S. Bernanke and they are available here.

Producer Price Index September August Y/Y 2006 2005 2004
Finished Goods 1.1% -1.4%    4.4%  2.9%  4.9%  3.6% 
  Core 0.1% 0.2%  2.0% 1.4% 2.4% 1.5%
Intermediate Goods 0.4% -1.2% 4.0% 6.4%  8.0% 6.6%
  Core 0.1% -0.5% 1.7% 6.0%  5.5% 5.7%
Crude Goods 0.1%  -3.0%   11.4% 1.4% 14.6%  17.5%
  Core 1.6% 1.3%  14.0% 20.9% 4.9%  26.5%
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