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Economy in Brief

U.S. Producer Prices Are Unexpectedly Tame; Core Prices Weaken
by Tom Moeller  December 12, 2019

The Producer Price Index for final demand was unchanged during November (1.1% y/y) following a 0.4% October rise. A 0.2% gain had been expected in the Action Economics Forecast Survey. Producer prices excluding food & energy declined 0.2% last month (+1.3% y/y) after rising 0.3%. A 0.1% uptick had been expected. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, held steady last month (1.3% y/y) after a 0.1% October gain.

Food prices jumped 1.1% (3.2% y/y) and added to a 1.3% October increase. Higher prices for beef & veal led the increase as they surged 5.4% (4.8% y/y), and dairy product costs improved 1.6% (7.7% y/y). A 4.1% weakening (+4.6% y/y) in fruit & melon prices tempered that increase while bakery product prices rose 0.4% (0.7% y/y).

Final demand energy prices rose 0.6% (-4.0% y/y) as gasoline prices increased 2.3% (-3.7% y/y) and natural gas prices rose 0.5% (1.8% y/y). Offsetting these increases was a 1.1% decline (-15.1% y/y) in the cost of heating oil and the cost of electric power fell 0.6% (+1.5% y/y).

Finished consumer goods prices less food & energy rose 0.2% (1.6% y/y) after a 0.1% uptick. Core nondurable goods prices increased 0.3% (2.0% y/y) and durable product prices improved a minimal 0.1% (0.9% y/y). Passenger car prices rose 0.1% (0.4% y/y) and light truck costs rose 0.5% (-0.6% y/y). Appliance prices held steady (3.3% y/y). Private capital equipment prices rose 0.1% (1.5% y/y).

Services prices for final demand declined 0.3% (+1.4% y/y) and reversed October's increase. Trade services prices fell 0.6% (+1.4% y/y) owing to a 0.7% weakening (+1.2% y/y) in the cost of finished goods trade. Transportation & warehousing prices rose 0.4% (0.2% y/y) but excluding these costs, prices declined 0.1% (+1.7% y/y).

The cost of construction held steady (3.7% y/y) last month following a 0.4% jump. Private construction prices held steady (3.6% y/y) but public construction costs eased 0.1% (3.8% y/y).

Intermediate product prices rose 0.2% (-2.9% y/y) as materials & component prices for manufacturing were off 0.2% (-3.6% y/y).

The PPI data can be found 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, %) Nov Oct Sep Nov Y/Y 2018 2017 2016
Final Demand 0.0 0.4 -0.3 1.1 2.9 2.3 0.4
   Excluding Food & Energy -0.2 0.3 -0.3 1.3 2.6 1.9 1.2
   Excluding Food, Energy & Trade Services 0.0 0.1 0.0 1.3 2.8 2.1 1.2
   Goods 0.3 0.7 -0.4 0.2 3.4 3.3 -1.4
      Foods 1.1 1.3 0.3 3.2 0.2 1.2 -2.8
      Energy 0.6 2.8 -2.5 -4.0 10.2 10.4 -8.4
    Goods Excluding Food & Energy 0.2 0.0 -0.1 0.5 2.5 2.2 0.7
   Services -0.3 0.3 -0.2 1.4 2.6 1.8 1.4
      Trade Services -0.6 0.8 -1.0 1.4 1.8 1.4 1.3
   Construction 0.0 0.4 0.1 3.7 4.0 2.2 1.1
Intermediate Demand - Processed Goods 0.2 0.4 -0.4 -2.9 5.3 4.7 -3.1
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