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Economy in Brief

U.S. Producer Prices Post a Surprising Decline
by Tom Moeller  November 13, 2015

The overall Final Demand Producer Price Index fell 0.4% during October (-1.6% y/y) following an unrevised 0.5% September decline. The Action Economics Forecast Survey expected a 0.2% increase. Prices excluding food & energy were off 0.3% (+0.1% y/y) and repeated the prior month's decline. A 0.1% rise had been expected.

Final demand goods prices (35% of the total index) fell 0.4% (-4.8% y/y), down for the fourth straight month. The latest decline was led by a 0.8% drop (-4.2% y/y) in food prices. Egg prices have been quite volatile and fell 26.9% m/m, but they have risen by roughly one quarter y/y. Beef & veal prices fell 4.7% (-10.7% y/y) while bakery product prices eased 0.1% (+0.8% y/y). Fresh & dry vegetable costs rose 11.0% y/y, but dairy product costs were off roughly one-quarter. Energy prices remained unchanged (-21.5% y/y). Gasoline prices rebounded 3.8% (-37.9% y/y), but home heating oil prices eased 0.1% (-40.9% y/y). Residential natural gas prices also were off 0.1% (-10.8% y/y) and residential electric power costs fell 0.5% (+0.1% y/y).

Final demand goods prices excluding food & energy declined 0.3% (-0.1% y/y) after remaining steady in September. Core finished consumer goods fell 0.2% (2.6% y/y) and reversed the prior month's rise. Core consumer nondurables costs remained steady (3.3% y/y) following a 0.2% rise, but consumer durables dropped 0.5% (+1.0% y/y). Private capital equipment costs eased 0.2% (0.9% y/y) while core goods prices for government purchases were off 0.1%, unchanged y/y. Prices of goods for export fell 0.4% (-3.5% y/y), down for the fourth straight month.

Final demand services costs (63% of the total index) declined 0.3% (+0.1% y/y) after a 0.4% fall. This was led by trade services which fell 0.7% (-0.7% y/y); trade services represent the margins charged by retail and wholesale dealers and merchants. Prices for transportation of passengers fell 0.3% (-5.5% y/y), off for the third straight month. Prices for transportation and warehousing of goods eased 0.1% (-2.2% y/y). Other services, including financial, health care and communications, fell 0.1% (+0.8% y/y) after a 0.3% decline.

Final demand construction prices (2.0% of the index) jumped 1.0% (2.3% y/y) after remaining unchanged. Private capital investment costs also improved 1.0% (2.2% y/y).

Prices of processed goods for intermediate demand fell 0.4% (-7.6% y/y), off for the fourth straight month.

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 (SA, %) Oct Sep Aug Y/Y 2014 2013 2012
Final Demand -0.4 -0.5 0.0 -1.6 1.6 1.3 1.9
  Excluding Food & Energy -0.3 -0.3 0.3 0.1 1.7 1.5 1.9
     Goods -0.4 -1.2 -0.6 -4.8 1.3 0.8 1.7
       Foods -0.8 -0.8 0.3 -4.2 3.2 1.7 3.0
       Energy 0.0 -5.9 -3.3 -21.5 -1.0 -0.8 0.2
     Goods Excluding Food & Energy -0.3 0.0 -0.2 -0.1 1.5 1.1 1.8
   Services -0.3 -0.4 0.4 0.1 1.8 1.6 1.9
   Construction 1.0 0.0 -0.1 2.3 3.0 1.8 2.9
Intermediate Demand - Processed Goods -0.4 -1.5 -0.6 -7.6 0.6 0.0 0.5
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