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Economy in Brief

U.S. Producer Price Index Falls With Oil and Food Prices; Shows Upward Pressure Elsewhere
by Tom Moeller  January 15, 2015

The overall Final Demand Producer Price Index fell 0.3% during December (+1.1% y/y) and followed an unrevised 0.2% November decline. A 0.4% decline was expected in the Action Economics Forecast Survey. Prices excluding food & energy increased 0.3% (2.1% y/y) following no change. A 0.1% uptick was expected. For the full year, the PPI gained 1.6%; excluding food & energy, prices rose 1.7%.

Services prices (64% of the total index) gained 0.2% (2.2% y/y) after a 0.1% uptick. Final demand trade services prices surged 0.6% (4.2% y/y) following a 0.1% uptick but prices for transportation of passengers were unchanged (-1.8% y/y). Prices for transportation and warehousing of goods for final demand fell 0.2% (+1.4% y/y).

Remaining unchanged for the second consecutive month were construction prices for final demand (2% of the total index). They improved 2.1% y/y helped by a 0.5% October surge.

Final demand goods prices (34% of the total index) declined 1.2% (-1.2% y/y), led lower by a 6.6% decline (-13.3% y/y) in energy prices. Gasoline prices were off 14.5% (-27.5% y/y) while home heating oil prices declined 15.9% (-32.0% y/y). Electric power costs slipped 0.1% (+3.3% y/y) but natural gas prices rebounded 3.2% (6.3% y/y). Finished food prices declined 0.4% (+4.2% y/y) following a 0.2% fall. Beef & veal prices slipped 0.3% (+24.2% y/y) and dairy product prices declined 4.2% (+2.1% y/y).

Final demand prices for goods excluding food & energy improved 0.2% (+1.6% y/y), the first rise in three months. Passenger car prices rose 0.2% (1.0% y/y) following no change while furniture prices increased 0.2% (1.3% y/y) after two months of 0.1% gain. Private capital equipment prices rose 0.2% (1.1% y/y) after a 0.1% slip.

Intermediate demand prices of processed goods were off 1.7% (-2.3% y/y), the fifth straight month of decline.

Measured using the old formula, which is being phased out as the headline series, producer prices fell 1.3% (-0.7% y/y), the largest of five consecutive monthly declines. Food costs moved 0.5% lower (+5.4% y/y) for a second straight month while energy prices declined 6.1% (-11.7% y/y). Prices excluding food & energy improved 0.3% (1.8% y/y).

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

Producer Price Index (%) Dec Nov Oct Dec Y/Y 2014 2013 2012
Final Demand -0.3 -0.2 0.2 1.1 1.6 1.3 1.9
  Excluding Food & Energy 0.3 0.0 0.4 2.1 1.7 1.5 1.9
     Goods -1.2 -0.7 -0.4 -1.0 1.3 0.8 1.7
       Foods -0.4 -0.2 1.0 4.4 3.2 1.7 3.0
       Energy -6.6 -3.1 -3.0 -12.9 -1.0 -0.8 0.2
     Goods Excluding Food & Energy 0.2 -0.1 -0.1 1.3 1.5 1.1 1.8
   Services 0.2 0.1 0.5 2.2 1.8 1.6 1.9
   Construction 0.0 0.0 0.5 2.1 3.0 1.8 2.9
Intermediate Demand - Processed Goods -1.7 -1.0 -0.9 -2.2 0.6 0.0 0.5
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