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Economy in Brief

U.S. Producer Price Decline Is Broad-Based
by Tom Moeller  October 14, 2015

The overall Final Demand Producer Price Index fell 0.5% in September (-1.1% y/y) following an unrevised zero change in August. It was the first decline since April. The Action Economics Forecast Survey expected a 0.2% decrease. Prices excluding food & energy also fell 0.3% (+0.8% y/y) and reversed a 0.3% increase. A 0.1% rise had been expected.

Final demand goods prices (35% of the total index) fell 1.2% (-5.1% y/y), down for the third straight month. The latest decline was led by a 5.9% drop (-23.7% y/y) in energy prices. Gasoline prices were off 16.6% (-42.8% y/) and home heating oil prices fell 6.5% (-44.1% y/y). Residential natural gas prices reversed most of the prior month's gain and declined 1.1% (-11.8% y/y) and residential electric power costs eased 0.1% (+1.0% y/y). Food prices declined 0.8% (-2.9% y/y), off for the second time in three months. Egg prices have been quite volatile and fell 18.2% m/m, but they have risen by roughly three quarters y/y. Beef & veal prices fell 7.9% (-3.3% y/y) while bakery product prices gained 0.1% (1.1% y/y). Fresh & dry vegetable costs rose 14.7% y/y, but dairy product costs were off 15.0% y/y.

Final demand goods prices excluding food & energy remained stable (0.2% y/y) after falling 0.2% in August. Core finished consumer goods rose 0.2% (2.6% y/y) after two months of remaining unchanged. Core consumer nondurables costs improved 0.2% (3.4% y/y), following two months of no change or slight decline, but consumer durables rose 0.3% (1.6% y/y). Private capital equipment costs improved 0.1% (1.3% y/y) while those for goods for government purchase declined 0.2% (-0.1% y/y). Prices of goods for export fell 0.5% (-3.6% y/y), down for the third straight month.

Final demand services costs (63% of the total index) declined 0.4% (+1.0% y/y) and reversed the August increase. This was led by trade services, which fell 0.4% (+2.1% y/y); trade services represent the margins charged by retail and wholesale dealers and merchants. Prices for transportation of passengers fell 1.8% (-6.6% y/y), repeating their August weakness. Prices for transportation and warehousing of goods in September also repeated the prior month's 0.3% decline (-2.4% y/y). Other services, including financial, health care and communications, among others, fell 0.3% (+1.0% y/y) after a 0.2% rise.

Final demand construction prices (2.0% of the index) remained unchanged (+1.8% y/y) after a 0.1% dip. Private capital investment costs were unchanged (1.8% y/y).

Prices of processed goods for intermediate demand fell 1.5% (-8.2% y/y), the largest of three consecutive declines.

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.

Economic Outlook and Monetary Policy from Fed Governor Lael Brainard can be found here.

Producer Price Index (SA, %) Sep Aug Jul Y/Y 2014 2013 2012
Final Demand -0.5 0.0 0.2 -1.1 1.6 1.3 1.9
  Excluding Food & Energy -0.3 0.3 0.3 0.8 1.7 1.5 1.9
     Goods -1.2 -0.6 -0.1 -5.1 1.3 0.8 1.7
       Foods -0.8 0.3 -0.1 -2.9 3.2 1.7 3.0
       Energy -5.9 -3.3 -0.6 -23.7 -1.0 -0.8 0.2
     Goods Excluding Food & Energy 0.0 -0.2 0.0 0.2 1.5 1.1 1.8
   Services -0.4 0.4 0.4 1.0 1.8 1.6 1.9
   Construction 0.0 -0.1 0.5 1.8 3.0 1.8 2.9
Intermediate Demand - Processed Goods -1.5 -0.6 -0.2 -8.2 0.6 0.0 0.5
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