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Economy in Brief

U.S. Producer Price Index is Revamped; Shows a Pickup in Inflation Pressures
by Tom Moeller  February 19, 2014

The Producer Price Index underwent major revision this month. It now includes prices for final demand of goods, services and construction as well as a reading of intermediate demand prices. The overall final demand PPI rose 0.2% in January (1.2% y/y) following a 0.1% uptick and no change in the prior two months. The 0.4% rise (0.9% y/y) in final demand for goods prices was the strongest gain in six months. A quickened 1.0% rise (-0.7% y/y) in food prices reflected a 1.1% gain (0.7% y/y) for consumers, a 1.4% increase (2.3% y/y) in the government sector and a 0.7% rise (-9.2% y/y) in export prices. Energy prices for final demand increased 0.3% (0.9% y/y). Prices for final demand excluding food and energy jumped 0.4% (1.3% y/y), the quickest monthly increase in two years. Finished core consumer goods prices were even stronger, however, and surged 0.7%. That pulled the y/y increase up to 2.1%.

There is a breakout of trade services prices in the new formula and they rose a fairly stable 0.1% (1.3% y/y). Prices for core final demand services ticked up 0.1% (1.8% y/y). A breakout of prices for construction final demand rose 0.6% (3.1% y/y). Prices at the intermediate demand level rose 0.6% (0.3% y/y).

Measured using the previous formula, which is being phased out as the headline series, producer prices increased 0.6% in January (1.5% y/y) after a 0.4% December rise. Expectations were for a 0.2% gain. Energy prices improved 0.4% (1.6% y/y) and food costs rose 1.1% (0.7% y/y). Prices excluding food & energy increased 0.5% (1.7% y/y) versus an expected 0.1%. Consumer goods prices provided the strength here and gained 0.7% (1.6% y/y) while capital equipment prices rose a moderate 0.2% (1.2% y/y).

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 (%) Jan Dec Nov Jan Y/Y 2013 2012 2011
Final Demand 0.2 0.1 0.0 1.2 1.2 1.9 3.9
  Final Demand for Goods 0.4 0.4 -0.2 0.9 0.8 1.7 6.8
       Foods 1.0 -0.4 -0.3 -0.7 1.6 3.0 8.5
       Energy 0.3 1.5 -0.6 0.9 -0.9 0.2 17.5
     Final Demand for Goods Excl. Food & Energy 0.4 0.3 0.0 1.3 1.1 1.8 3.4
  Final Demand Services 0.1 -0.1 0.1 1.3 1.6 1.9 2.1
  Final Demand Construction 0.6 0.0 0.1 3.1 1.8 2.9 2.2
Intermediate Demand - Processed Goods 0.6 0.5 -0.4 0.3 0.0 0.5 8.9
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