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Economy in Brief

U.S. Producer Price Index Decline Reflects Broad-Based Weakness
by Tom Moeller  March 13, 2015

The overall Final Demand Producer Price Index fell 0.5% during February (-0.6% y/y) following an unrevised 0.8% January decline. A 0.2% rise was expected in the Action Economics Forecast Survey. Prices excluding food & energy also were off 0.5% (+1.0% y/y) following a 0.1% slip. A 0.1% rise was expected.

Final demand goods prices (34% of the total index) fell 0.4% (-4.2% y/y), led lower by a 1.6% decline (+0.4% y/y) in food prices. Beef & veal prices decreased 3.2% (+19.1% y/y) but dairy product prices declined 3.0% (-12.8% y/y). Egg prices rose 12.6% (10.4% y/y). Energy prices remained unchanged (-22.4% y/y). Gasoline prices improved 1.5% (-42.7% y/y) and home heating oil prices recovered 9.9% (-39.6% y/y). Electric power costs slipped 0.1% (4.6% y/y) while natural gas prices fell 2.1% (-9.2% y/y). Final demand prices for goods excluding food & energy backpedaled 0.1% (+0.4% y/y) after a 0.2% decline. Passenger car prices fell 0.8% (+0.2% y/y) while furniture prices improved 0.4% (2.0% y/y). Light motor truck prices gained 0.5% (0.3% y/y). Private capital equipment prices improved 0.1% (1.0% y/y) for a second straight month.

Services prices (64% of the total index) were off 0.5% (+1.2% y/y) following a 0.2% decline. Final demand trade services prices fell 1.5% (+2.2% y/y) and retraced two months of 0.5% increase. Prices for transportation of passengers declined 2.7% (+0.3% y/y). Prices for transportation and warehousing of goods fell 1.1% (-0.8% y/y).

Inching up by 0.1% (2.0% y/y) were construction prices for final demand (2% of the total index) after a 0.4% rise.

Intermediate demand prices of processed goods were off 0.6% (-6.4% y/y), the seventh straight monthly decline.

Measured using the old formula, which is being phased out as the headline series, producer prices slipped 0.1% (-3.5% y/y). Consumer food costs moved 1.4% lower (+1.8% y/y), down for the fourth straight month but energy prices rebounded 0.6% (-19.9% y/y). Prices excluding food & energy ticked 0.1% higher (1.5% y/y). Intermediate goods prices declined 0.6% (-6.5% y/y), led lower by a 1.9% shortfall (-3.1% y/y) in food prices while energy costs fell 0.7% (-21.5% y/y). Intermediate goods prices excluding food & energy were off 0.4% (-2.2% y/y). Crude goods prices were pulled 3.9% lower (-25.1% y/y) by a 6.7% drop (-9.2% y/y) in food price. Energy prices gained 0.9% (-45.0% y/y) and core prices fell 5.2% (11.4% 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 (%) Feb Jan Dec Feb Y/Y 2014 2013 2012
Final Demand -0.5 -0.8 -0.2 -0.6 1.6 1.3 1.9
  Excluding Food & Energy -0.5 -0.1 0.3 1.0 1.7 1.5 1.9
     Goods -0.4 -2.1 -1.1 -4.2 1.3 0.8 1.7
       Foods -1.6 -1.1 -0.1 0.4 3.2 1.7 3.0
       Energy 0.0 -10.3 -6.2 -22.4 -1.0 -0.8 0.2
     Goods Excluding Food & Energy -0.1 -0.2 0.1 0.4 1.5 1.1 1.8
   Services -0.5 -0.2 0.3 1.2 1.8 1.6 1.9
   Construction 0.1 0.4 0.0 2.0 3.0 1.8 2.9
Intermediate Demand - Processed Goods -0.6 -2.8 -1.6 -6.4 0.6 0.0 0.5
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