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Economy in Brief

U.S. PPI Declines With Lower Energy, Food And Core Prices
by Tom Moeller October 20, 2009

Pricing power virtually evaporated last month with across-the-board declines in goods prices. The PPI for finished goods fell 0.6%. It was the second decline in the last three months and left prices down 4.7% from the year-ago level. The decline compared to the Consensus expectation for no change. Moreover, it was broad-based and included lower food & energy prices as well as the third decline in core prices in the last five months. The 0.1% decline in the PPI less food & energy contrasted with expectations for a 0.1% increase and it pulled the y/y change to 1.8%, the weakest since May 2007.

Lower finished energy prices led the decline in last month's PPI with a 2.4% drop (-22.2% y/y). Though the decline has been partially reversed here in October, last month it reflected a 5.4% fall in gasoline prices (-37.5% y/y). Natural gas prices also fell by 1.9% (-24.5% y/y) and fuel oil prices fell 24.1% (-40.5% y/y).

The PPI for finished consumer goods less food & energy slipped 0.1% but gained 2.2% y/y. That was the weakest annual increase since June 2007. Finished durables prices slipped 0.2% (+2.0% y/y) and prices of core finished consumer nondurable goods slipped for the fourth month in the last six. The 2.3% y/y increase was down from 5.9% as of last November. Capital equipment prices also reflected economic weakness and slipped 0.1%. That pulled the y/y increase down to 1.4% after a 4.3% rise as of last December.

Prices for intermediate goods inched 0.2% higher, paced by a firm 0.9% increase in core prices. They were led by a 1.3% (-11.3% y/y) increase in prices for materials for manufacturing. Intermediate food prices fell 0.5% (-12.9% y/y) and energy prices also slipped 2.1% (-24.2% y/y).

The crude materials PPI fell 2.1% and was led lower by a 5.4% decline (-42.6% y/y) in  crude energy prices. In contrast, core prices showed strength and increased for the sixth straight month.

The producer price data is available in Haver's USECON database. More detailed data is in the PPI and in the PPIR databases. 

Producer Price Index (%) September August Y/Y 2008 2007 2006
Finished Goods -0.6 1.7 -4.7 6.4 3.9 2.9
  Core -0.1 0.2 1.8 3.4 2.0 1.5
Intermediate Goods 0.2 1.8 -11.6 10.5 4.0 6.4
  Core 0.9 0.6 -7.5 7.4 2.8 6.0
Crude Goods -2.1 3.8 -31.5 21.4 11.9 1.4
  Core 3.6 6.0  -19.6 14.8 15.6 20.8
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