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Economy in Brief

U.S. PPI Soared
by Tom Moeller April 15, 2008

Finished producer prices in the U.S. soared 1.1% last month, up sharply from the unrevised 0.3% February increase. The increase nearly doubled Consensus expectations for a 0.6% rise and it was the strongest rise since last November.

Energy prices surged 2.9% (20.4% y/y) as home heating oil prices spiked by 13.1% (52.0% y/y) and natural gas prices increased 4.2% (4.0% y/y). Gasoline prices continued firm and rose 1.3% (36.4%).

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 spiked 1.2% (5.8% y/y). During the past three months food prices have risen at a 10.1% annual rate led by soaring egg prices (56.3% y/y), higher dairy prices (13.5% y/y), higher coffee prices (13.8% y/y) and higher bakery product prices (7.8% y/y). That strength has been offset somewhat by easier gains in prices for beef & veal (-0.3% y/y) and fresh fruits (0.0% y/y).

Less food and energy, prices matched expectations and rose a more moderate 0.2%, less than half the 0.5% February surge. Prices of core finished consumer goods rose 0.3% (3.3% y/y) due to strength in nondurable prices (4.4% y/y). Capital equipment prices rose a modest 0.1% (2.0% y/y), about equal to the rise for all of last year.

Intermediate goods prices surged 2.3% on the strength of a 2.9% (20.0% y/y) jump in food prices and a 5.9% (26.8% y/y) increase in energy prices. Excluding food & energy, prices about doubled the February rise with a 1.1% increase.

The crude materials PPI continued to surge and rose 8.0%. Crude energy materials prices jumped another 13.4% (47.1% y/y) and food prices jumped 2.0% (18.1% y/y). The core crude materials PPI also was quite firm and rose 3.5%, about the same as it did in February. Prior strength in prices for iron & steel scrap eased a bit to a 16.0% y/y rise. That was down from last year's full year increase of 21.4%.

Financial Market Turmoil and the Federal Reserve: The Plot Thickens is yesterday's speech by Federal Reserve Board Governor Kevin Warsh ad it can be found here.

Producer Price Index (%) March February Y/Y 2007 2006 2005
Finished Goods 1.1 0.3 6.9  3.9 3.0  4.9 
  Core 0.2 0.5 2.8 1.9 1.5 2.4
Intermediate Goods 2.3 0.8 10.6 4.1 6.4  8.0
  Core 1.1 0.6 5.5 2.8 6.0  5.5
Crude Goods 8.0  3.7 31.3 12.1 1.4 14.6
  Core 3.5 3.3  16.7 15.7 20.8 4.9
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