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Economy in Brief

U.S. Producer Prices Are Tame M/M But Core Trend Increase Is Up
by Tom Moeller  September 14, 2011

The U.S. producer price index for finished goods was unchanged last month after an unrevised 0.2% July gain. The figure compared to Consensus expectations for a 0.1% slip, according to the Action Economics survey. Like July, the change in energy and food prices offset one another. Excluding these two components, the 0.1% price gain was the weakest since May and was half of the expected increase. However, there's evidence of firmer pricing power. The 2.5% twelve-month increase in core prices was double last year's rise and the 3.4% three-month gain was triple.

Finished consumer goods prices were unchanged (8.2% y/y) with the rise held back by lower energy prices. Conversely, the 1.1% rise in food prices doubled July's gain. Outside of energy & food, pricing power weakened with a 0.1% m/m rise (2.5% y/y). Within the components, women's apparel prices rose 1.8% y/y after last year's 0.5% y/y decline and men's apparel costs jumped 5.2% y/y after a 0.3% 2010 uptick. Household furniture prices rose 2.0%, up from 0.3% last year, and appliance prices rose 1.5% after a 0.6% fall in 2010. Passenger car prices reversed most of last year's 1.4% decline and tobacco prices rose a stable and strong 6.2% y/y. Capital goods prices slipped 0.2% last month but were up 1.6% y/y after last year's 0.4% gain.

The energy price decline reflected a 1.0% drop (+32.8% y/y) in gasoline and a 1.2% decline (+37.0% y/y) in home heating oil. Electric power costs slipped 0.1% (+1.1% y/y). Food prices again rose a strong 1.1% (8.4% y/y) led by a more-than one-third rise in prices for eggs and the 17.2% rise in beef. Dairy prices also posted a firm 17.8% y/y gain and vegetable prices rose 6.3%.

Intermediate goods prices fell 0.5% as energy prices declined 2.3% (+19.1% y/y) and food prices rose 1.7% (15.3% y/y). Core-intermediate prices slipped 0.1% (+7.5% y/y). Crude materials prices ticked up 0.2% as energy prices fell 5.1% (+5.3% y/y) but food prices jumped 4.7% (29.1% y/y). However, prices less food & energy rose another, strong 1.6% and by one-quarter y/y. Strength in aluminum as well as iron & steel scrap prices continued with a one-quarter y/y rise.

The PPI data are contained in Haver's USECON database with further detail in PPI and PPIR. The expectation figure is available in the AS1REPNA database.

Producer Price Index (%) Aug Jul Jun Aug Y/Y 2010 2009 2008
Finished Goods 0.0 0.2 -0.4 6.5 4.2 -2.5 6.4
   Energy -1.0 -0.6 -2.8 16.3 13.7 -17.7 14.1
   Food 1.1 0.6 0.6 8.4 3.9 -1.4 6.8
  Less Food & Energy 0.1 0.4 0.3 2.5 1.2 2.5 3.4
Intermediate Goods -0.5 0.2 0.0 10.6 6.4 -8.4 10.3
  Less Food & Energy -0.1 0.2 0.3 7.5 4.3 -4.2 7.4
Crude Materials 0.2 -1.2 -0.6 18.5 21.4 -30.3 21.5
  Less Food & Energy 1.6 0.7 1.1 24.2 32.6 -23.4 14.7
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