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Economy in Brief

U.S. PPI Slips M/M With Lower Food & Energy Costs; Full Year Gain Accelerates
by Tom Moeller  January 18, 2012

Overall inflation may be tame but trouble was brewing last year. The December producer price index for finished goods slipped 0.1% during December following an unrevised 0.3% November gain. The figure compared to Consensus expectations for a 0.1% uptick, according to the Action Economics survey. For all of last year, however, wholesale prices rose a firmer 6.0% after a 4.2% gain in 2010. Core pricing power picked up last month as the PPI less food & energy rose 0.3%, its strongest gain since July. A 0.1% rise had been expected. For 2011, the full-year gain of 2.4% was double 2010.

A 0.8% decline (+7.7% y/y) in food prices accounted for much of the slip in last month's PPI. However, the 6.3% full-year gain was the strongest since 2008. Prices for fresh & dried vegetables fell sharply last month and reversed the November increase. However, for the full year they rose 9.3%. Beef & veal prices rose sharply m/m and by 15.1% for the full year. Dairy prices also posted a strong 12.5% gain for all of the year after a 10.8% gain in 2010. Energy prices also fell 0.8% last month but posted a strong 15.7% full year gain. Gasoline prices fell 3.6% m/m but were up by one-third for the year. Home heating oil costs also fell 4.5% m/m but also were up by one-third for the year. These strong full-year increases were accompanied by a modest 2.7% rise in electric power costs and a 1.4% decline in prices for natural gas.

Finished consumer goods prices fell 0.2% (+5.1% y/y). Less food & energy, consumer goods prices rose 0.3% (3.1% y/y) and by 2.4% for the full year. Within the components, men's apparel prices rose 5.0% for the full year after being little-changed in 2010. Household furniture prices rose 2.2% y/y, up from 0.2% in 2010. Appliance prices rose 1.1% y/y after a 0.6% fall in 2010 and women's apparel prices rose 1.3% for the year after a 0.4% dip. Passenger car prices inched up 0.6% y/y after 2010's 1.4% decline and tobacco prices rose a stable and strong 6.0% for the year. Capital equipment prices rose 0.2% last month and the 1.5% annual increase built on a 0.4% rise in 2010.

Intermediate goods prices fell 0.5% m/m but were up 9.1% for the year as energy prices slipped 0.3% last month (17.7% y/y) and food prices fell 0.6% (12.0% y/y). Core-intermediate prices fell 0.5% (+6.3% y/y). Crude materials prices fell 1.1% last month, but gained 7.5% for the year, as energy prices slipped 0.1%, though up 10.9% for the year. Food prices fell 2.6% (23.6% y/y). Prices less food & energy were unchanged m/m but up 18.8% for the full year.

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 (%) Dec Nov Oct Dec Y/Y 2011 2010 2009
Finished Goods -0.1 0.3 -0.3 4.4 6.0 4.2 -2.5
 Less Food & Energy 0.3 0.1 0.0 3.1 2.4 1.2 2.5
  Food -0.8 1.0 0.1 6.1 6.3 3.9 -1.4
  Energy -0.8 0.1 -1.4 6.5 15.7 13.8 -17.7
Intermediate Goods -0.5 0.2 -1.1 5.8 9.1 6.4 -8.4
 Less Food & Energy -0.5 -0.4 -0.6 4.2 6.3 4.3 -4.2
Crude Materials -1.1 3.8 -2.5 11.1 17.5 21.5 -30.3
 Less Food & Energy 0.0 -2.5 -4.3 3.3 18.8 32.6 -23.4
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