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Economy in Brief

U.S. Producer Pricing Power Recedes M/M, But Strengthens Y/Y
by Tom Moeller  January 11, 2018

The headline Final Demand Producer Price Index using new methodology eased 0.1% during December following a 0.4% November increase. It was the first monthly decline since August 2016. The y/y rise nevertheless remained firm at 2.6%, the strongest gain since 2011. A 0.2% December rise had been expected in the Action Economics Forecast Survey. The PPI excluding food & energy also slipped 0.1%. A 0.2% rise was expected. The y/y rise of 2.3% moved above the gains of 1.7% in 2016 and 0.2% in 2015.

Using the old methodology for the Producer Price Index, prices fell 0.3% (+3.3% y/y) following a 0.8% gain. Excluding food & energy, the index held steady (2.0% y/y) after two months of 0.3% increase.

An updated measure of core producer price inflation is the overall index excluding food, energy and trade services. It gained 0.1% last month (2.3% y/y) after three months of stronger increase.

Final demand goods prices held steady (3.5% y/y) following a 1.0% jump. The price index excluding food & energy increased 0.2% after two months of 0.3% rise. The 2.3% Dec/Dec gain rose above the 1.7% increase in 2016 and the 0.1% slip during 2015.

Food prices declined 0.7% (+2.1% y/y) following a 0.3% rise. Beef & veal prices weakened 6.3% (+3.3% y/y) after a 3.4% rise. Egg prices were off 4.1% (+48.8% y/y) after a 3.2% decline. Dairy product prices improved 0.2% (-0.7% y/y) and reversed the prior month's increase, while fresh fruit & melon costs declined 0.5% (+6.5% y/y). Energy prices held steady (10.1% y/y) after a 4.6% jump. Gasoline prices declined 3.9% (+16.7% y/y) after a 15.8% jump. Home heating oil prices jumped 13.3% (27.9% y/y) following a 0.9% rise. Natural gas prices improved 0.8% (5.8% y/y) after a 0.2% rise. Electric power costs ticked 0.1% higher (2.6% y/y) following a 0.4% increase.

Nondurable consumer goods prices less food & energy held steady (3.8% y/y) following a 0.3% rise. Durable consumer goods prices also were unchanged (1.2% y/y) after a 0.5% rise. Household furniture costs rose 0.3% (2.9% y/y) after a 1.1% jump. Passenger car prices rose 0.2% (-0.5% y/y) after a 0.5% rise. Light truck prices held steady (1.0% y/y) following a 1.1% surge. Capital equipment prices held steady (1.0% y/y) following a 0.4% jump.

Final demand for services prices eased 0.2% (+2.2% y/y). Prices less trade, transportation & warehousing gained 0.1% (2.3% y/y) following a 0.4% increase. Trade services prices declined 0.6% (+2.1% y/y) after easing 0.3%. Private passenger transportation prices declined 4.3% (-3.7% y/y) following three months of strong increase.

Final demand construction prices slipped 0.1% (+3.0% y/y) as prices for private capital investment eased 0.1% (+3.0% y/y). Prices for public investment ticked 0.1% higher (3.0% y/y).

Prices for intermediate demand for goods strengthened 0.5% (5.1% y/y) for a second consecutive 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, %, New Methodology) Dec Nov Oct Dec Y/Y 2017 2016 2015
Final Demand -0.1 0.4 0.4 2.6 2.3 0.4 -0.9
   Excluding Food & Energy -0.1 0.3 0.4 2.3 1.9 1.2 0.8
   Excluding Food, Energy & Trade Services 0.1 0.4 0.2 2.3 2.1 1.2 0.6
   Goods 0.0 1.0 0.3 3.5 3.3 -1.4 -4.3
      Foods -0.7 0.3 0.5 2.1 1.2 -2.8 -2.6
      Energy 0.0 4.6 0.0 10.1 10.4 -8.4 -20.6
    Goods Excluding Food & Energy 0.2 0.3 0.3 2.3 2.2 0.7 0.4
   Services -0.2 0.2 0.5 2.2 1.8 1.4 0.9
      Trade Services -0.6 -0.3 1.1 2.1 1.5 1.3 1.3
   Construction -0.1 -0.2 0.5 3.0 2.2 1.1 1.9
Intermediate Demand - Processed Goods 0.5 0.5 1.0 5.1 4.7 -3.1 -16.9
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