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Economy in Brief

U.S. Producer Prices Rebound; Core Prices Similarly Increase
by Tom Moeller  October 10, 2018

The headline Final Demand Producer Price Index using new methodology gained an expected 0.2% during September (2.6% y/y) following a 0.1% August dip. The PPI excluding food & energy also rose an expected 0.2% last month (2.5% y/y) following a 0.1% August easing. The expectations figures are from the Action Economics Forecast Survey. The PPI excluding food, beverages and trade services is another measure of underlying price inflation. It strengthened 0.4% (2.9% y/y) last month following a 0.1% uptick.

The PPI using the old methodology eased 0.1% during September (+3.0% y/y) following stability during August. Prices excluding food & energy improved 0.3% (2.7% y/y) after a 0.1% uptick.

A 0.3% increase (2.4% y/y) in services prices provided the impetus for last month's overall PPI rise. It followed two months of 0.1% decline. The cost of trade of finished products held steady (0.7% y/y) after two months of 0.8% decline. Passenger transportation costs shot up 5.4% (4.8% y/y) after declining in each of the prior three months. Transportation & warehousing of goods costs rebounded 0.5% (6.3% y/y) after a slight decline. Final demand for services prices excluding trade, transportation & warehousing gained 0.3% (2.7% y/y) for the third consecutive month.

Goods prices excluding food & energy improved 0.2% (2.7% y/y) following no change. Durable consumer goods prices increased 0.4% (2.1% y/y) after two months of lesser gain. Core nondurable consumer goods prices rose 0.2% (3.7% y/y) following one month of stability. Household furniture prices held steady (2.9 y/y) but appliance costs jumped 1.3% (4.1% y/y). Capital equipment prices rose 0.3% for the third month in the last four. The 2.1% y/y increase accelerated from 0.3% as of mid-2016. Government purchased goods prices less food & energy rose 0.2% (2.5% y/y) for the second straight month.

Food prices weakened 0.6% (-1.4% y/y), the fourth consecutive month of decline. Fresh fruit & vegetable prices fell 1.1% (-4.1% y/y) after an 11.3% drop while beef & veal prices rose 1.2% (1.1% y/y). Dairy product costs declined 0.7% (-3.0% y/y), off for the fourth straight month. Energy product prices fell 0.8% (+9.7% y/y) as gasoline prices dropped 3.5% (+14.9% y/y). Natural gas prices eased 0.5% (-1.1% y/y), and the cost of electric power dropped 0.6% (+0.9% y/y). Offsetting these declines was an 8.7% strengthening (42.5% y/y) in the cost of home heating oil.

Construction prices notched 0.1% higher (3.4% y/y) for the second straight month.

Prices for intermediate demand processed goods held steady (5.8% y/y) for the third straight month.

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) Sep Aug Jul Sep Y/Y 2017 2016 2015
Final Demand 0.2 -0.1 0.0 2.6 2.3 0.4 -0.9
   Excluding Food & Energy 0.2 -0.1 0.1 2.5 1.9 1.2 0.8
   Excluding Food, Energy & Trade Services 0.4 0.1 0.3 2.9 2.1 1.2 0.6
   Goods -0.1 0.0 0.1 3.2 3.3 -1.4 -4.3
      Foods -0.6 -0.6 -0.1 -1.4 1.2 -2.8 -2.6
      Energy -0.8 0.4 -0.5 9.7 10.4 -8.4 -20.6
    Goods Excluding Food & Energy 0.2 0.0 0.3 2.7 2.2 0.7 0.4
   Services 0.3 -0.1 -0.1 2.4 1.8 1.4 0.9
      Trade Services 0.1 -0.9 -0.8 0.9 1.5 1.3 1.3
   Construction 0.1 0.1 0.4 3.4 2.2 1.1 1.9
Intermediate Demand - Processed Goods 0.0 0.0 0.0 5.8 4.7 -3.1 -6.9
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