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Economy in Brief

U.S. PPI Strengthens As Energy & Food Costs Jump
by Tom Moeller  December 14, 2010

The U.S. Producer Price Index for finished goods surged 0.8% last month, double the 0.4% gains during the prior three. The rise outpaced Consensus expectations for a 0.6% increase. Higher energy prices were behind much of the strength while food prices recovered after an October dip. The PPI less food & energy rose a moderate 0.3% after the 0.6% October decline. Consensus expectations were for a 0.2% rise.

Energy prices led last month's pricing strength with a 2.1% jump (9.5% y/y) as gasoline prices increased 4.7% (11.8% y/y). Since the late-2008 low, gasoline prices have roughly doubled. Home heating oil prices also were strong, posting a 7.0% increase (17.2% y/y). These gains, however, were offset by monthly declines in natural gas prices (-2.0% y/y) as well as electricity prices (+3.4% y/y). Food prices strengthened again. The 1.0% increase (4.1% y/y) reflected strength in egg (12.2%), beef & veal (12.7% y/y) and dairy product (10.2% y/y) prices.

Core finished consumer goods prices rose 0.3% (2.0% y/y) and recovered most of the 0.4% October decline. Passenger car prices jumped 1.7% (-1.9% y/y). Capital goods prices inched up 0.2% (+0.3% y/y) after a sharp 0.8% October fall as light truck prices nudged up 0.3% (-1.0% y/y).

Intermediate goods prices jumped another 1.1% as energy prices surged 2.8% (11.3% y/y). That increase was accompanied by a 1.9% surge in food prices (7.5% y/y). Core-intermediate prices also were strong with a 0.7% gain (4.7% y/y). Earlier strength in crude goods pricing eased to a 0.6% gain due to a 1.3% decline in energy prices (-2.4% y/y). Crude food prices rose another 0.7% (21.3% y/y). Continuing to reflect strength in the industrial sector, core crude prices posted a 3.1% (30.2% y/y) jump that was led by higher iron & steel scrap (43.7% y/y), aluminum base scrap (30.7% y/y) and copper scrap (27.1% y/y) prices.

The PPI data are contained in Haver's USECON database with further detail in PPI and PPIR.

The Breadth of Disinflation from the Federal Reserve Bank of San Francisco is available here.

Producer Price Index (%) Nov Oct Sept Year Ago 2009 2008 2007
Finished Goods 0.8 0.4 0.4 3.5 -2.5 6.4 3.9
     Energy 2.1 3.7 0.5 9.5 -17.6 14.1 6.8
     Food 1.0 -0.1 1.2 4.1 -1.4 6.8 6.6
   Less Food & Energy 0.3 -0.6 0.1 1.3 2.6 3.4 2.0
Intermediate Goods 1.1 1.2 0.5 6.3 -8.4 10.3 4.0
   Less Food & Energy 0.7 0.6 0.2 4.7 -4.2 7.4 2.8
Crude Materials 0.6 4.3 -0.5 13.0 -30.3 21.4 11.9
   Less Food & Energy 3.1 2.1 5.5 30.2 -23.5 14.8 15.6
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