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Economy in Brief

U.S. Producer Prices Weaken as Energy Prices Decline
by Tom Moeller  April 9, 2020

Weakness in industrial sector activity is translating into reduced pricing power. The Producer Price Index for final demand eased 0.2% (+0.7% y/y) during March following a 0.6% February fall. A 0.3% decline had been expected in the Action Economics Forecast Survey. Producer prices excluding food & energy improved 0.2% (1.4% y/y) following a 0.3% decline. An unchanged reading had been expected. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, weakened 0.2% (+1.0% y/y) after slipping 0.1% in February.

Energy prices declined 6.7% (-10.3% y/y) after a 3.6% drop. Gasoline prices fell 16.8% (-18.9% y/y) while natural gas prices held steady (-1.3% y/y) for the second straight month. Home heating oil prices fell 0.7% (-17.6% y/y).

Food prices held steady (0.8% y/y) after falling 1.6% as the cost of beef & veal prices (-9.8% y/y) declined sharply for the fourth straight month. Dairy product prices also fell 0.9% m/m but were 2.9% higher y/y.

Final demand goods prices less food & energy improved 0.2% in March (0.5% y/y) after a 0.1% dip. The cost of finished consumer goods less food & energy rose 0.3% (1.2% y/y) after holding steady for two months. Core nondurable goods prices edged 0.2% higher (1.5% y/y) for a second month and durable product prices gained 0.4% (0.5% y/y). Private capital equipment prices increased 0.3% (1.3% y/y) following no change in February.

Services prices for final demand improved 0.2% (1.5% y/y) after falling 0.3% in February. Trade services prices strengthened 1.4% (2.4% y/y), as the cost of trade of finished goods surged 1.6%. Transportation & warehousing prices fell 3.3% (-2.4% y/y), down for the third straight month. Excluding these costs, prices held steady (1.5% y/y).

The cost of construction rose 0.1% (3.7% y/y) for the second straight month.

Intermediate product prices weakened 1.1% (-3.7% y/y) after declining 0.9%.

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, %) Mar Feb Jan Mar Y/Y 2019 2018 2017
Final Demand -0.2 -0.6 0.5 0.7 1.7 2.9 2.3
   Excluding Food & Energy 0.2 -0.3 0.5 1.4 2.1 2.6 1.9
   Excluding Food, Energy & Trade Services -0.2 -0.1 0.4 1.0 2.0 2.9 2.1
   Goods -1.0 -0.9 0.1 -1.2 0.4 3.4 3.4
      Foods 0.0 -1.6 0.2 0.8 1.8 0.2 1.2
      Energy -6.7 -3.6 -0.7 -10.3 -4.4 10.1 10.6
    Goods Excluding Food & Energy 0.2 -0.1 0.3 0.5 1.4 2.5 2.2
   Services 0.2 -0.3 0.7 1.5 2.2 2.6 1.8
      Trade Services 1.4 -0.7 1.2 2.4 2.5 1.8 1.5
   Construction 0.1 0.1 0.8 3.7 4.9 4.1 2.2
Intermediate Demand - Processed Goods -1.1 -0.9 -0.3 -3.7 -1.4 5.4 4.7
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