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Economy in Brief

U.S. Producer Price Increase Moderates; Core Prices Are Tame
by Tom Moeller  May 9, 2019

The Producer Price Index for final demand increased 0.2% during April (2.2% y/y) following a 0.6% March surge. The gain matched expectations in the Action Economics Forecast Survey. Producer prices excluding food & energy edged 0.1% higher last month (2.4% y/y) after a 0.3% increase. A 0.2% rise had been anticipated. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, strengthened 0.4% (2.2% y/y) during April following stability in March.

Higher energy prices strengthened the PPI for the third straight month, as they rose 1.8% (1.0% y/y). The gain reflected a 5.9% increase (1.8% y/y) in gasoline prices. Home heating oil prices improved 2.2% (3.2% y/y) and the cost of electric power rose 0.4% (1.4% y/y). Offsetting these gains was a 0.5% decline (+1.5% y/y) in the cost of natural gas.

Lower food prices offset some of the energy price strength with a 0.2% decline (+1.0% y/y). It was the third shortfall in four months. Egg prices declined 16.1% and they were down by roughly one-half y/y. Fresh vegetable prices also fell 11.6% m/m, but they rose by one-quarter y/y. Offsetting these declines was a 1.2% rise (6.2% y/y) in beef & veal prices while dairy product prices increased 1.0% (4.1% y/y).

Prices for core goods for final demand held steady (1.8% y/y), with core finished consumer goods prices edging up 0.2% (2.5% y/y). Nondurable consumer goods costs rose 0.2% (3.0% y/y) and durable consumer goods prices edged 0.1% higher (1.6% y/y). Appliance prices fell 0.5% (+3.7% y/y) but passenger car prices rose 0.6% (1.2% y/y). Private capital equipment costs also rose 0.2% (2.5% y/y). Offsetting these gains was a 0.3% decline (+0.4% y/y) in prices for core goods for export.

Services prices improved a slight 0.1% (2.4% y/y), though trade services prices declined 0.5% (+3.1 % y/y). The cost of trade of finished goods declined 0.7% (+2.8% y/y). Passenger transportation fees strengthened 3.5% (3.0% y/y) and transportation & warehousing costs held steady (3.9% y/y). Service prices less trade, transportation & warehousing gained 0.3% (2.1% y/y).

Construction costs strengthened 1.6% (5.4% y/y), private building costs by 1.5% (5.5% y/y) and government by 1.7% (5.3% y/y).

Prices for intermediate demand slipped 0.1% (+1.3% y/y) after a 0.8% rise.

The PPI data using both the current and old methodology are contained in Haver's USECON database. Further detail can be found in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

Producer Price Index (SA, %) Apr Mar Feb Apr Y/Y 2018 2017 2016
Final Demand 0.2 0.6 0.1 2.2 2.9 2.3 0.4
   Excluding Food & Energy 0.1 0.3 0.1 2.4 2.6 1.9 1.2
   Excluding Food, Energy & Trade Services 0.4 0.0 0.1 2.2 2.8 2.1 1.2
   Goods 0.3 1.0 0.4 1.5 3.4 3.3 -1.4
      Foods -0.2 0.3 -0.3 1.0 0.2 1.2 -2.8
      Energy 1.8 5.6 1.8 1.0 10.2 10.4 -8.4
    Goods Excluding Food & Energy 0.0 0.2 0.1 1.8 2.5 2.2 0.7
   Services 0.1 0.3 0.0 2.4 2.6 1.8 1.4
      Trade Services -0.5 1.1 -0.4 3.1 1.8 1.4 1.3
   Construction 1.6 0.2 -0.1 5.4 4.0 2.2 1.1
Intermediate Demand - Processed Goods -0.1 0.8 0.4 1.3 5.3 4.7 -3.1
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