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Economy in Brief

U.S. Producer Prices Exhibit Broad-based Strength
by Tom Moeller  November 9, 2018

The headline Final Demand Producer Price Index using new methodology increased 0.6% during October (2.9% y/y) following a 0.2% September gain. It was the largest increase since September 2012. A 0.3% rise had been expected in the Action Economics Forecast Survey. Producer prices excluding food & energy improved 0.5% (2.6% y/y), the largest increase since January 2016. A 0.2% gain had been anticipated. The PPI excluding food, beverages and trade services is another measure of underlying price inflation. It rose 0.2% (2.8% y/y) last month following a 0.4% increase.

The PPI using the old methodology eased 0.7% during October (3.4% y/y) following a 0.1% dip during September. Prices excluding food & energy held steady (2.3% y/y) after a 0.3% rise.

Strength in producer prices reflected a 0.7% increase (2.4% y/y) in services prices. It followed a 0.3% rise. The cost of trade of finished products surged 1.6% (1.4% y/y) after stability in September. Passenger transportation costs increased 1.1% (3.5% y/y) after a 5.4% strengthening. Transportation & warehousing of goods costs rose 0.3% (6.4% y/y) after a 0.5% rise. Final demand for services prices excluding trade, transportation & warehousing gained 0.2% (2.6% y/y) after two months of 0.3% increase.

Goods prices increased 0.6% (3.6% y/y) last month after a slight decline in September. Goods prices excluding food & energy held steady  (2.5% y/y) following a 0.2% rise. Durable consumer goods prices fell 0.2% (2.0% y/y) after a 0.4% gain. A 1.1% jump (3.8% y/y) in household furniture prices was offset by a 0.7% decline (+3.3% y/y) in the cost of appliances. Core nondurable consumer goods prices rose 0.2% (2.7% y/y) for a second straight month. Capital equipment prices held steady (2.0% y/y) following a 0.3% rise. Government purchased goods prices less food & energy ticked 0.1% higher (2.4% y/y) after two months of 0.2% increase.

Energy product prices strengthened 2.7% (12.5% y/y) as gasoline prices rebounded 7.6% (27.1% y/y) after a 3.5% drop. Electric power costs rose slightly m/m (1.0% y/y). These gains were offset by a 1.4% decline (-2.6% y/y) in natural gas prices and a 1.1% fall (+29.0% y/y) in home heating oil prices.

Food prices rebounded 1.0% (-0.7% y/y after a 0.6% fall. The rise was led by a 4.0% strengthening of beef & veal prices both m/m and y/y. Dairy product costs rose 1.2% (-1.9% y/y) after four months of decline. These increases were countered by a 7.2% decline (-5.6 y/y) in fresh fruit & vegetable prices, down sharply for the third straight month.

Construction prices jumped 1.9% (4.7% y/y) after two months of 0.1% gain.

Prices for intermediate demand processed goods rose 0.8% (5.9% y/y) following three straight months of stability.

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) Oct Sep Aug Oct Y/Y 2017 2016 2015
Final Demand 0.6 0.2 -0.1 2.9 2.3 0.4 -0.9
   Excluding Food & Energy 0.5 0.2 -0.1 2.6 1.9 1.2 0.8
   Excluding Food, Energy & Trade Services 0.2 0.4 0.1 2.8 2.1 1.2 0.6
   Goods 0.6 -0.1 0.0 3.6 3.3 -1.4 -4.3
      Foods 1.0 -0.6 -0.6 -0.7 1.2 -2.8 -2.6
      Energy 2.7 -0.8 0.4 12.5 10.4 -8.4 -20.6
    Goods Excluding Food & Energy 0.0 0.2 0.0 2.5 2.2 0.7 0.4
   Services 0.7 0.3 -0.1 2.4 1.8 1.4 0.9
      Trade Services 1.6 0.1 -0.9 1.5 1.5 1.3 1.3
   Construction 1.9 0.1 0.1 4.7 2.2 1.1 1.9
Intermediate Demand - Processed Goods 0.8 0.0 0.0 5.9 4.7 -3.1 -6.9
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