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Economy in Brief

U.S. PPI Total & Total Firm
by Tom Moeller March 18, 2008

Finished producer prices in the U.S. rose 0.3% during February following a 1.0% surge in January. The latest increase fell just short of Consensus expectations for a 0.4% rise but the 6.8% increase versus last February was near this cycle's high. Moreover it was well up from the 3.9% increase during all of last year.

Less food and energy the 0.5% increase in prices was quite a bit stronger than expectations for a 0.2% gain. While the y/y increase held roughly steady at 2.5% the annualized rate of growth during the last three months surged to 4.7%, about the fastest in ten years.

Energy prices rose 0.8% (20.7% y/y) and added to the prior month's 1.5% surge. Gasoline prices rose 2.9% for the second consecutive month (43.2% y/y) though home heating oil prices fell 3.7% (+36.8% y/y). Natural gas prices jumped 5.7% (5.3% y/y).

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 fell 0.5% (+6.0% y/y) and gave back just a piece of the 1.7% January surge. During the past three months food prices have risen at a 10.8% annual rate.

Prices of core finished consumer goods rose 0.5% (2.5% y/y). That gain was well ahead of expectations for a 0.2% increase and it raised the three month change to 4.7% (AR). Passenger car prices rose 0.8% (1.2% y/y). Capital equipment prices rose a firm 0.5% (1.9% y/y) led by a 0.8% rise in prices of light trucks (0.1% y/y).

Intermediate goods prices rose 0.8% following the 1.4% January surge. Excluding food & energy prices were strong again and posted a 0.6% increase. Industrial chemical prices remained quite firm and rose 17.8% from last year.

The crude materials PPI surged again during February. A 3.7% rise followed the 2.5% jump during January. Crude energy materials prices jumped another 5.6% (30.2% y/y). The core crude materials PPI also was quite firm and posted a 3.3% gain. Prices for iron & steel scrap are up 34.5% y/y and copper base scrap prices are 25.1% higher y/y.

Producer Price Index (%) February January Y/Y 2007 2006 2005
Finished Goods 0.3 1.0  6.8  3.9 3.0  4.9 
  Core 0.5 0.4 2.5 1.9 1.5 2.4
Intermediate Goods 0.8 1.4 9.1 4.1 6.4  8.0
  Core 0.6 0.8 4.8 2.8 6.0  5.5
Crude Goods 3.7  2.5  24.6 12.2 1.4 14.6
  Core 3.3 4.0  20.6 15.9 20.8 4.9
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