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Economy in Brief

U.S. Producer Prices Trend Upward
by Gerald D. Cohen  February 15, 2018

The headline Final Demand Producer Price Index using new methodology increased 0.4% in January following an unchanged reading in December. The year-on-year (y/y) gain edged up to 2.7%. A 0.3% January rise had been expected in the Action Economics Forecast Survey. The PPI excluding food & energy also increased 0.4% in January, well above the 0.2% expectation. Year-on-year growth decelerated slightly to 2.2% from 2.3% in December. An updated measure of core producer price inflation -- the overall index excluding food, energy and trade services -- showed the same 0.4% gain last month. This took the y/y growth to 2.5%, the strongest reading since the series began in August 2013.

Using the old methodology for the Producer Price Index, prices surged 0.7% (+3.0% y/y) in January following an unchanged reading. Excluding food & energy, the index edged up 0.1% (1.9% y/y).

Final demand goods prices jumped 0.7% (3.3% y/y) following a 0.1% rise. The goods price index excluding food & energy increased 0.2% (2.1% y/y).

Food prices declined 0.2% (+1.8% y/y) in January. Energy prices jumped 3.4% (9.2% y/y), as the price of West Texas Intermediate Crude Oil was up 9.9% in January (21.1% y/y). Thus gasoline prices surged 7.7% (12.9% y/y) and home heating oil prices increased 5.5% (19.6% y/y). Meanwhile natural gas prices fell 2.7% (0.9% y/y) and electric power costs rose 1.3% (3.9% y/y).

Nondurable consumer goods prices less food & energy edged up 0.1% (3.5% y/y) the second consecutive 0.1% gain. Durable consumer goods prices increased 0.2% (1.5% y/y) after an unchanged reading in December. Passenger car prices were unchanged (-0.6% y/y) and light truck prices declined 0.1% (1.5% y/y) following a 1.1% surge. Capital equipment prices increased 0.1% (1.0% y/y) after a flat reading in December. Manufacturing capital equipment rose 0.2% (1.6% y/y) while nonmanufacturing capital equipment showed another unchanged reading (0.8% y/y).

Final demand for services prices increased 0.3% (+2.3% y/y) in January. Prices less trade, transportation & warehousing gained 0.4%, bringing the y/y growth to 2.5%, the strongest reading since the series began in November 2009. Trade services prices rose 0.3% (+1.7% y/y) after two consecutive monthly declines. Private passenger transportation prices declined 1.6% (-3.6% y/y) after a 4.5% drop in December.

Final demand construction prices jumped 0.8% (+3.4% y/y) driven by 0.7% increase in private capital investment constructions (+3.4% y/y) and a 1.0% gain in government (3.6% y/y).

Prices for intermediate demand goods strengthened 0.7% (4.6% y/y). This is the sixth consecutive month of gains of 0.5% or greater.

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) Jan Dec Nov Jan Y/Y 2017 2016 2015
Final Demand 0.4 0.0 0.4 2.7 2.3 0.4 -0.9
   Excluding Food & Energy 0.4 -0.1 0.2 2.2 1.9 1.2 0.8
   Excluding Food, Energy & Trade Services 0.4 0.1 0.3 2.5 2.1 1.2 0.6
   Goods 0.7 0.1 0.9 3.3 3.3 -1.4 -4.3
      Foods -0.2 -0.4 0.4 1.8 1.3 -2.8 -2.6
      Energy 3.4 0.5 3.6 9.2 10.4 -8.4 -20.6
    Goods Excluding Food & Energy 0.2 0.2 0.3 2.1 2.2 0.7 0.4
   Services 0.3 -0.1 0.2 2.3 1.8 1.4 0.9
      Trade Services 0.3 -0.4 -0.3 1.7 1.5 1.3 1.3
   Construction 0.8 -0.1 -0.2 3.4 2.2 1.1 1.9
Intermediate Demand - Processed Goods 0.7 0.5 0.5 4.6 4.7 -3.1 -6.9
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