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Economy in Brief

U.S. Producer Prices Hold Steady
by Tom Moeller  August 9, 2018

The headline Final Demand Producer Price Index using new methodology remained unchanged during July following an unrevised 0.3% rise in June. The 3.3% y/y rise remained nearly the strongest since November 2011. A 0.2% increase had been expected in the Action Economics Forecast Survey. The PPI excluding food & energy ticked 0.1% higher (2.7% y/y) following two consecutive months of 0.3% increase. A 0.3% July rise had been expected. An updated measure of core producer price inflation (the overall index excluding food, energy and trade services) increased 0.3% (2.8% y/y), the same as during June.

Using the old methodology for the Producer Price Index, prices rose 0.2% (4.2% y/y) after holding steady in June. Excluding food & energy, the index increased 0.3% (2.4% y/y) following three consecutive months of 0.2% gain.

Final demand goods prices edged 0.1% higher (4.5% y/y) for a second straight month. The goods price index excluding food & energy rose 0.3% for the third consecutive month. The 2.8% y/y increase was, however, the swiftest increase since January 2012, up from 0.5% y/y as of July 2016.

Energy prices declined 0.5% (+17.0% y/y) following a 0.8% gain. Gasoline prices eased slightly (39.1% y/y) after a 0.5% rise. Home heating oil prices declined 3.9% (+50.8% y/y) following three straight months of strong increase. Electric power costs eased 0.8% (0.9% y/y) following a 0.4% rise. The 0.5% fall (-1.7% y/y) in natural gas prices was the fifth consecutive monthly drop. Food prices slipped 0.1% (-1.2% y/y) after a 1.1% surge. Beef & veal prices tumbled 4.1% (-1.6% y/y), down sharply for the third month in the last four. The decline was countered by fresh fruit prices which strengthened 9.0% (8.3% y/y) following two months of strong increase. Dairy product prices declined 1.2% (-2.4% y/y) following a 0.1% slip.

Nondurable consumer goods prices less food & energy increased 0.3% (3.4% y/y) after easing 0.1% in June. Men's apparel prices rose a steady 1.2% y/y and women's clothing costs improved 0.3% y/y. Durable consumer goods prices rose a weakened 0.2%, but the 2.0% y/y increase compared to little change y/y in 2016. Passenger car prices jumped 0.7% (0.0% y/y), a great improvement from the weakness of the last 18 months, but light truck prices ticked just 0.1% higher (1.7% y/y). Household furniture prices increased 2.6% y/y while appliance prices rose 2.7% y/y. Both gains were nearly the strongest since 2012, and up sharply following weakness though 2016. Private capital equipment prices improved 0.3% (1.8% y/y) for the third straight month. Manufacturing capital equipment costs rose a steady 0.3% (2.6% y/y), while nonmanufacturing capital equipment prices also gained a steady 0.3% (1.5% y/y).

Final demand for services prices eased 0.1% (+2.6% y/y) after a 0.4% strengthening. Prices less trade, transportation & warehousing increased 0.3% (2.4% y/y) for a second straight month. Trade services costs declined 0.8% after three months of strong increase (2.0% y/y). Transportation and warehousing prices improved 0.6% and 7.2% y/y, three times last year's annual increase.

Final demand construction prices rose 0.4% after a 0.2% gain. The 3.2% y/y increase was steady versus last year and up from 1.1% in 2016. Private capital investment construction prices rose 3.5% y/y while government building costs rose 2.9% y/y.

Prices for intermediate demand goods held steady (6.8% y/y) following a 0.7% increase.

The PPI data are contained in Haver's USECON database with further detail in PPI and PPIR. West Texas Intermediate Crude Oil prices are found in the WEEKLY database while the expectations figures are available in the AS1REPNA database.

Producer Price Index (SA, %, New Methodology) Jul Jun May Jul Y/Y 2017 2016 2015
Final Demand 0.0 0.3 0.5 3.3 2.3 0.4 -0.9
   Excluding Food & Energy 0.1 0.3 0.3 2.7 1.9 1.2 0.8
   Excluding Food, Energy & Trade Services 0.3 0.3 0.1 2.8 2.1 1.2 0.6
   Goods 0.1 0.1 1.0 4.5 3.3 -1.4 -4.3
      Foods -0.1 -1.1 0.1 -1.2 1.2 -2.8 -2.6
      Energy -0.5 0.8 4.6 17.0 10.4 -8.4 -20.6
    Goods Excluding Food & Energy 0.3 0.3 0.3 2.8 2.2 0.7 0.4
   Services -0.1 0.4 0.3 2.6 1.8 1.4 0.9
      Trade Services -0.8 0.7 0.9 2.0 1.5 1.3 1.3
   Construction 0.4 0.2 0.0 3.2 2.2 1.1 1.9
Intermediate Demand - Processed Goods 0.0 0.7 1.5 6.8 4.7 -3.1 -6.9
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