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Economy in Brief

U.S. PPI Total & Core Strong
by Tom Moeller February 26, 2008

Finished producer prices surged 1.0% during January following a 0.3% dip in December. The latest increase was triple Consensus expectations for a 0.3% rise. At an annual rate the PPI is up 13.5% during the last three months.

Less food and energy this measure of core prices rose 0.4% and it was double expectations. At an annual rate core producer prices have risen 3.7% during the last three months.

Energy prices made up half of December's decline with a 1.5% rise (+23.7% y/y). Gasoline prices rose 2.9% (48.1% y/y) after a 7.6% December drop. Home heating oil prices surged 8.5% (48.% y/y) and natural gas prices rose 0.7% (0.6% y/y) after five consecutive months of decline.

Why Do Gasoline Prices React to Things That Have Not Happened? from the Federal Reserve Bank of St. Louis is available here.

Finished consumer food prices jumped 1.7% (8.2% y/y) after an upwardly revised 1.4% December surge. During the past three months food prices have risen at a 12.0% annual rate.

Prices of core finished consumer goods rose 0.4% (2.7% y/y) lifted by a 0.8% rise (-0.5% y/y) in passenger car prices and a 0.4% (1.6%) gain in prices of household appliances. Core consumer nondurables prices were strong again and rose 0.4% (3.9% y/y). The three month gain in these prices is 3.9%. Pharmaceutical prices have been quite strong but apparel prices have been flat.

Capital equipment prices also rose 0.4% (1.6% y/y) after a 0.1% December uptick. Heavy truck prices rose 0.4% (3.3% Y/Y) but prices for light trucks fell 0.2% (+0.2% y/y), down for the second consecutive month.

Intermediate goods prices surged 1.4% after a modest 0.2% December decline. Excluding food & energy prices also were strong. They posted a 0.8% increase led by strength in industrial chemical prices which have risen 40.7% (AR) over the last three months. Steel mill prices also have been strong but copper prices have been down.

The crude materials PPI surged 2.5%, more than double the strong December rise. Crude energy materials prices jumped 1.8% (40.9% y/y). The core crude materials PPI surged 4.0% (21.0% y/y) as prices for iron & steel scrap as well as prices for aluminum scrap have been quite strong.

Producer Price Index January December Y/Y 2007 2006 2005
Finished Goods 1.0% -0.3%  7.7%  3.9% 3.0%  4.9% 
  Core 0.4% 0.2%  2.4% 1.9% 1.5% 2.4%
Intermediate Goods 1.4% -0.2% 9.1% 4.1% 6.4%  8.0%
  Core 0.8% 0.0% 4.1% 2.8% 6.0%  5.5%
Crude Goods 2.5%  1.1%   31.0% 12.2% 1.4% 14.6%
  Core 4.0% 0.2%  21.0% 15.9% 20.8% 4.9%
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