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Economy in Brief

U.S. PPI Declines But Core Price Increase Remains Steady
by Tom Moeller  June 13, 2012

The producer price index for finished goods fell 1.0% during May following an unrevised 0.2% decline during April. The latest was the largest one-month decline since July 2009. Expectations were for a 0.6% May drop. Core pricing power continued to firm with the economy's recovery. The PPI less food & energy again matched expectations and rose 0.2% after a 0.2% rise during April. The y/y gain of 2.8% was up from 2.4% during all of last year and 1.2% in 2010.

A 4.3% decline (-5.7% y/y) in energy prices accounted for most of the PPI's drop last month. Gasoline prices fell 8.7% (-8.8 y/y) but home heating oil costs rebounded 1.5% (2.8% y/y). Still falling were residential gas prices by 2.5% (-16.1% y/y) but electricity costs ticked up 0.1% (0.5% y/y). Food prices reversed two months of increase with a 0.6% drop (+3.1% y/y) reflecting a 1.1% decline in fresh eggs (-12.0% y/y) and a 3.5% plunge in beef & veal (+8.8% y/y) prices.

Finished consumer goods prices dropped 1.5% (+0.3% y/y) after a 0.3% April downturn. Less food & energy, consumer goods prices again rose 0.2% (3.3% y/y). Within the components, men's apparel prices rose 6.4% y/y while women's clothing costs increased a scant 0.4% y/y. Household appliance prices rose 4.5% since May of 2011 and passenger car prices increased 1.2% y/y. Capital equipment prices ticked up just 0.1% last month and by a steady 2.1% year-to-year.

Intermediate goods prices fell 0.8% (-0.5% y/y) with the drop in energy prices. Energy costs were off 3.3% last month and by 4.7% y/y while food prices were unchanged (2.4% y/y). Core-intermediate prices fell 0.2% and rose a negligible 0.5% y/y. Crude materials prices fell 3.2% last month and were down 8.0% year-to-year. Energy prices declined 5.0% (-17.9% y/y) while food prices were off 2.3% (-0.2% y/y). Prices less food & energy eased 1.3% and were down 3.9% versus last year.

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

Producer Price Index (%) May Apr Mar May Y/Y 2011 2010 2009
Finished Goods -1.0 -0.2 0.0 0.8 6.0 4.2 -2.5
 Less Food & Energy 0.2 0.2 0.3 2.8 2.4 1.2 2.6
  Food -0.6 0.2 0.2 3.1 6.3 3.9 -1.4
  Energy -4.3 -1.4 -1.0 -5.7 15.7 13.6 -17.6
Intermediate Goods -0.8 -0.5 0.7 -0.5 9.1 6.4 -8.4
 Less Food & Energy -0.2 0.2 0.6 0.5 6.2 4.3 -4.2
Crude Materials -3.2 -4.4 -2.5 -8.0 17.4 21.4 -30.3
 Less Food & Energy -1.3 -1.8 1.1 -3.9 18.5 32.5 -23.3
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