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Economy in Brief

U.S. Producer Price Index Decline Reflects Broad-Based Weakness
by Tom Moeller  February 18, 2015

The overall Final Demand Producer Price Index fell 0.8% during January (0.0% y/y) following a 0.2% December decline, revised from -0.3%. A 0.5% drop was expected in the Action Economics Forecast Survey. Prices excluding food & energy slipped 0.1% (+1.6% y/y) following a 0.3% rise. A 0.1% uptick was expected.

Final demand goods prices (34% of the total index) declined 2.1% (-3.7% y/y), led lower by a 10.3% decline (-22.2% y/y) in energy prices. Gasoline prices were off 24.0% (-44.4% y/y) while home heating oil prices declined 19.6% (-46.0% y/y). Electric power costs gained 1.2% (4.1% y/y) but natural gas prices fell 4.2% (-2.7% y/y). Finished food prices declined 1.1% (+2.5% y/y) following a 0.1% slip. Beef & veal prices increased 1.0% (23.6% y/y) but dairy product prices declined 5.7% (-7.2% y/y).

Final demand prices for goods excluding food & energy backpedaled 0.2% (+0.6% y/y) after a 0.1% gain. Passenger car prices rose 0.3% (1.0% y/y) following two months of 0.1% uptick while furniture prices increased 0.3% (+1.5% y/y). Light motor truck prices were off 0.7% (-0.1% y/y), down for the third month in the last four. Private capital equipment prices improved 0.1% (0.9% y/y) after a 0.2% rise.

Services prices (64% of the total index) were off 0.2% (+2.0% y/y) after a 0.3% increase. Final demand trade services prices posted another strong increase of 0.5% (4.4% y/y). Prices for transportation of passengers declined 1.0% (+0.3% y/y). Prices for transportation and warehousing of goods for final demand fell 0.6% (+0.8% y/y).

Recovering by 0.4% (1.9% y/y) were construction prices for final demand (2% of the total index) following two months of being unchanged.

Intermediate demand prices of processed goods were off 2.8% (-5.5% y/y), the largest of six straight monthly declines.

Measured using the old formula, which is being phased out as the headline series, producer prices fell 2.1% (-3.3% y/y), the largest of six consecutive monthly declines. Consumer food costs moved 0.8% lower (+3.9% y/y), down for the third straight month while energy prices declined 9.6% (-20.7% y/y). Prices excluding food & energy improved 0.2% (1.5% y/y). Intermediate goods prices declined 2.8% (-5.7 y/y), led lower by an 8.3% decline (-21.2% y/y) in energy prices while food costs fell 2.5% (-0.6% y/y). Intermediate goods prices excluding food & energy were off 1.3% (-1.4% 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 (%) Jan Dec Nov Jan Y/Y 2014 2013 2012
Final Demand -0.8 -0.2 -0.2 0.0 1.6 1.3 1.9
  Excluding Food & Energy -0.1 0.3 0.1 1.6 1.7 1.5 1.9
     Goods -2.1 -1.1 -0.7 -3.7 1.3 0.8 1.7
       Foods -1.1 -0.1 0.0 2.5 3.2 1.7 3.0
       Energy -10.3 -6.2 -3.8 -22.2 -1.0 -0.8 0.2
     Goods Excluding Food & Energy -0.2 0.1 0.0 0.6 1.5 1.1 1.8
   Services -0.2 0.3 0.2 2.0 1.8 1.6 1.9
   Construction 0.4 0.0 0.0 1.9 3.0 1.8 2.9
Intermediate Demand - Processed Goods -2.8 -1.6 -1.0 -5.5 0.6 0.0 0.5
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