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Economy in Brief

U.S. Producer Prices Weaken as Energy Prices Decline
by Tom Moeller  May 13, 2020

• Lower oil prices drag the PPI lower.

• Prices for other goods weaken.

• Services prices decline.

Industrial sector pricing power remains weak with the downturn in economic activity. The Producer Price Index for final demand declined 1.3% (-1.2% y/y) during April following a 0.2% easing in March. A 0.5% decline had been expected in the Action Economics Forecast Survey. Underlying pricing pressure also remained weak. Producer prices excluding food & energy eased 0.3% (+0.6% y/y) following a 0.2% gain. An unchanged reading had been expected. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, fell 0.9% (-0.3% y/y) after modest easing during the prior two months.

Lower energy prices were the largest catalyst for last month's PPI decline, falling 19.0% (-29.6% y/y) after being down in each of the prior three months. Gasoline prices collapsed 56.6% (-67.0% y/y) while home heating oil prices were off 35.6% (-47.3% y/y). Natural gas prices eased 0.5% (-2.2% y/y) after holding steady for two months. Working upward by 0.2% (-0.1% y/y) was the cost of electric power.

Food prices fell 0.5% (+0.3% y/y) after holding steady in March. A 12.6% rise (0.8% y/y) in beef & veal prices followed four consecutive months of decline. This strength was offset by a 4.4% drop (-2.4% y/y) in dairy product prices. Fruit & melon prices declined 10.5% (NSA, -7.3% y/y) and vegetable costs were off 3.4% (-7.5% y/y). Dairy product pries fell 4.4% (-2.4% y/y) but egg prices jumped roughly one-third and were 111.9% higher y/y.

Final demand goods prices less food & energy were off 0.4% in April (+0.1% y/y) after a 0.2% rise. The cost of finished consumer goods less food & energy held steady (1.1% y/y) for the third month in the last four. Core nondurable goods prices improved 0.3% (1.7% y/y) after rising 0.2% in each of the prior two months. Women's apparel prices rose 1.4% (0.9% y/y) but men's clothing costs held steady (1.1% y/y). Durable product prices eased 0.3% (-0.1% y/y). This reflected a 0.4% decline (-1.0% y/y) in passenger car prices and a 0.6% rise, both m/m and y/y, in household appliance costs. Private capital equipment prices fell 0.2% (+1.0% y/y) following a 0.3% gain in March.

Services prices for final demand slipped 0.2% (+0.8% y/y) after rising 0.2% in March. Trade services prices strengthened 1.6% (3.4% y/y), as the cost of trade of finished goods surged 1.9% (3.8% y/y). A 3.5% decline (-6.3% y/y) in transportation & warehousing prices offset the rise. Excluding these costs, prices declined 0.9% (+0.3% y/y).

The cost of construction rose 0.5% (2.8% y/y) following two straight months of 0.1% increase.

Intermediate product prices fell 3.7% (-7.3% y/y), the fourth consecutive month of decline.

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.

Current Economic Issues from Chair Jerome H. Powell is available here.

Producer Price Index (SA, %) Apr Mar Feb Apr Y/Y 2019 2018 2017
Final Demand -1.3 -0.2 -0.6 -1.2 1.7 2.9 2.3
   Excluding Food & Energy -0.3 0.2 -0.3 0.6 2.1 2.6 1.9
   Excluding Food, Energy & Trade Services -0.9 -0.2 -0.1 -0.3 2.0 2.9 2.1
   Goods -3.3 -1.0 -0.9 -5.0 0.4 3.4 3.4
      Foods -0.5 0.0 -1.6 0.3 1.8 0.2 1.2
      Energy -19.0 -6.7 -3.6 -29.6 -4.4 10.1 10.6
    Goods Excluding Food & Energy -0.4 0.2 -0.1 0.1 1.4 2.5 2.2
   Services -0.2 0.2 -0.3 0.8 2.2 2.6 1.8
      Trade Services 1.6 1.4 -0.7 3.4 2.5 1.8 1.5
   Construction 0.5 0.1 0.1 2.8 4.9 4.1 2.2
Intermediate Demand - Processed Goods -3.7 -1.1 -0.9 -7.3 -1.4 5.4 4.7
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