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Economy in Brief

U.S. Producer Prices Decline Led by Lower Energy Costs
by Tom Moeller  January 15, 2019

The headline Final Demand Producer Price Index using new methodology fell 0.2% during December following a 0.1% uptick in November. A 0.1% decline had been expected in the Action Economics Forecast Survey. From December-to-December, the index rose 2.5%, the same as during 2017. Producer prices excluding food & energy eased 0.1% after a 0.3% increase. A 0.2% gain had been anticipated. For the year, the core PPI rose 2.7% after rising 2.2% in 2017. The PPI excluding food, beverages and trade services is another measure of underlying price inflation. It held steady last month (2.8% y/y) following a 0.3% increase. It's 2017 rise was 2.3%.

The PPI using the old methodology fell 0.3% during December (+1.4% y/y) following a 0.8% November decline. Prices excluding food & energy improved 0.1% last month (2.5% y/y) after rising 0.3% in November.

The decline in the PPI reflected a 5.4% drop in energy product prices which added to a 5.0% November drop. Gasoline prices weakened 13.1% (-12.2% y/y) after a 14.0% decline and home heating oil prices fell 4.9% (+5.6% y/y). Natural gas prices offset these declines with a 2.3% gain (1.8% y/y) but electric power costs fell 0.3% (+0.3% y/y).

A 0.1% dip (+2.8% y/y) in services prices followed a 0.3% rise. The cost of trade of finished products fell 0.3% (+2.5% y/y) after a 0.3% gain in November. Passenger transportation costs backpedaled 1.5% (+7.5% y/y) after a 2.3% increase. Transportation & warehousing of goods costs rose 0.3% (6.0% y/y) following a 0.8% rise. Final demand for services prices excluding trade, transportation & warehousing edged 0.1% higher (2.6% y/y) for a second straight month.

Goods prices decreased 0.4% (+1.7% y/y) for a second straight month. Goods prices excluding food & energy ticked 0.1% higher (2.5% y/y) following a 0.3% gain. Durable consumer goods prices held steady (1.6% y/y) for a second straight month. Household furniture prices rose 0.2% (2.7% y/y) and the cost of appliances rebounded 0.8% (3.7% y/y) after two straight months of decline. Core nondurable consumer goods prices improved 0.1% (3.4% y/y) following a 0.9% jump. Capital equipment prices rose 0.3% (2.2% y/y). Government purchased goods prices less food & energy held steady (2.3% y/y) after two months of 0.1% gain.

Food prices strengthened 2.6% last month (3.3% y/y) after a 1.3% increase. The rise was led by a one-half jump (26.3% y/y) in fresh fruit & melon costs. Fresh & dry vegetable prices surged 28.5% (52.8% y/y). Egg prices fell 0.9% and were down by one-quarter y/y. Beef & veal prices declined 1.7% (+5.5% y/y), but the cost of pork increased 2.3% (-4.2% y/y). Dairy product costs rose 0.6% (-1.5% y/y).

Construction prices improved 0.1% (5.1% y/y) after a 0.2% gain.

Prices for intermediate demand processed goods fell 0.9% (+3.0% y/y), following a 0.7% decline during November.

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) Dec Nov Oct Dec Y/Y 2018 2017 2016
Final Demand -0.2 0.1 0.6 2.5 2.9 2.3 0.4
   Excluding Food & Energy -0.1 0.3 0.5 2.7 2.6 1.9 1.2
   Excluding Food, Energy & Trade Services 0.0 0.3 0.2 2.8 2.8 2.1 1.2
   Goods -0.4 -0.4 0.6 1.7 3.4 3.3 -1.4
      Foods 2.6 1.3 1.0 3.3 0.2 1.2 -2.8
      Energy -5.4 -5.0 2.7 -2.7 10.1 10.4 -8.4
    Goods Excluding Food & Energy 0.1 0.3 0.0 2.5 2.5 2.2 0.7
   Services -0.1 0.3 0.7 2.8 2.6 1.8 1.4
      Trade Services -0.3 0.3 1.6 2.5 1.6 1.4 1.3
   Construction 0.1 0.2 1.9 5.1 4.0 2.2 1.1
Intermediate Demand - Processed Goods -0.9 -0.7 0.8 3.0 5.3 4.7 -3.1
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