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Economy in Brief

U.S. PPI Increase Largest Since November, Gain in Core Prices Eased
by Tom Moeller June 17, 2008

U.S. finished producer prices jumped 1.4% last month and the increase was the largest since a 2.6% rise last November. The increase surpassed Consensus expectations for a 1.0% rise.

Finished energy prices surged 4.9% (19.4% y/y) as gasoline prices jumped 9.3% (26.3% y/y). Natural gas prices also were quite strong and they rose 3.1% (12.4% y/y) while home heating oil prices increased 8.0% (58.4% y/y). Residential electric power costs rose 0.6% (4.8% y/y).

Finished consumer food prices were strong again and rose 0.8% (6.6% y/y). The strength was led by fresh vegetables (17.1% y/y), pasta products (37.8% y/y) and dairy products (7.0% y/y). Meat prices continued to decline.

Less food & energy, the gain in finished goods prices eased to 0.2% from 0.4% in April. The latest figure matched expectations. Prices of core finished consumer goods rose 0.3% (3.5% y/y) and the annual rate of increase leveled out. Durable consumer goods prices reversed the April increase and fell 0.4% (1.7% y/y). Capital equipment prices rose 0.1% (2.3% y/y).

Intermediate goods prices surged by 2.9% after the 0.9% April increase. Excluding food & energy these prices spiked another 2.0%.

The crude materials PPI jumped 6.7% due to a 13.1% (67.0% y/y) spike in energy prices. Crude food prices also were strong and jumped 1.8% (16.7% y/y). Crude petroleum prices have more than doubled y/y while natural gas prices also surged by 17.0% (49.7% y/y).

Inflation Regimes and Inflation Expectations from the Federal Reserve Bank of St. Louis is available here.

Producer Price Index (%) May April Y/Y 2007 2006 2005
Finished Goods 1.4 0.2 7.2 3.9 3.0  4.9 
  Core 0.2 0.4 3.0 1.9 1.5 2.4
Intermediate Goods 2.9 0.9 12.5 4.1 6.4  8.0
  Core 2.0 1.2 7.4 2.8 6.0  5.5
Crude Goods 6.7 3.2 41.7 12.1 1.4 14.6
  Core 5.0 7.9  33.2 15.7 20.8 4.9
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