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Economy in Brief

U.S. PPI Posts Strongest Gain Since 2008
by Tom Moeller  January 13, 2011

The U.S. Producer Price Index for finished goods jumped another 1.1% last month after its 0.8% November surge. The rise outpaced Consensus expectations for a 0.8% increase and it pulled the overall gain in prices last year to 4.3%, the highest since 2008. Higher energy prices continued as the driving force behind the strength while food prices also remained firm. The PPI less food & energy rose a moderate 0.2% after a 0.3% November increase. The gain matched Consensus expectations.

Energy prices led last month's pricing strength with a 3.7% jump (12.3% y/y) as gasoline prices increased 6.4% (18.4% y/y). Since the late-2008 low, gasoline prices have roughly doubled. Home heating oil prices also were strong, posting a 12.3% increase (27.8% y/y). Natural gas prices rose a moderate 0.9% (-1.1% y/y) and electricity prices rose 0.7% (3.8% y/y). Food prices continued strong. The 0.8% increase (3.5% y/y) reflected strength in beef & veal (15.1% y/y), fish (12.7% y/y) and fresh fruit & vegetable (3.9% y/y) prices.

Core finished consumer goods prices rose a moderate 0.2% (1.4% y/y). For the full year the 1.2% increase was the weakest since 2003. Furniture prices rose 1.3% since last December while passenger car prices fell 2.1%. Capital goods prices inched up 0.1% (0.4% y/y).

Intermediate goods prices jumped another 1.0% as energy prices surged another 3.1% (13.8% y/y). That increase was accompanied by a 0.6% gain in food prices (6.2% y/y). Core-intermediate prices remained firm with a 0.4% gain (4.5% y/y). Earlier strength in crude goods pricing continued with a 4.0% gain due to a 7.7% jump in energy prices. Energy prices rose 6.2% Dec/Dec but 22.4% for the full year. Crude food prices rose 18.8% y/y. Continuing to reflect strength in the industrial sector, core crude prices posted another 3.1% (28.1% y/y) jump that was led by higher iron & steel scrap (39.5% y/y), aluminum base scrap (20.9% y/y) and copper scrap (22.8% y/y) prices.

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

Economic Outlook Symposium: Summary of 2010 Results and Forecasts for 2011 from the Federal Reserve Bank of Chicago can be found here.

Producer Price Index (%) Dec Nov Oct Year
Ago
2010 2009 2008
Finished Goods 1.1 0.8 0.4 4.1 4.3 -2.5 6.4
    Energy 3.7 2.1 3.7 12.3 14.0 -17.6 14.1
    Food 0.8 1.0 -0.1 3.5 4.0 -1.4 6.8
  Less Food & Energy 0.2 0.3 -0.6 1.4 1.2 2.6 3.4
Intermediate Goods 1.0 1.1 1.2 6.6 6.5 -8.4 10.3
  Less Food & Energy 0.4 0.7 0.6 4.5 4.3 -4.2 7.4
Crude Materials 4.0 0.6 4.3 15.6 21,1 -30.3 21.4
  Less Food & Energy 3.1 3.1 2.1 28.1 32.6 -23.5 14.8
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