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Economy in Brief

U.S. Producer Prices Rise Moderately in August
by Tom Moeller  September 10, 2020

• Core pricing power is improved.

• Energy & food prices slip.

• Services prices remain firm.

The Producer Price Index for final demand rose 0.3% (-0.2% y/y) during August following a 0.6% July increase. A 0.2% increase had been expected in the Action Economics Forecast Survey. Underlying pricing power also improved. Producer prices excluding food & energy rose 0.4% (0.6% y/y) after a 0.5% increase. A 0.2% rise had been expected. Another measure of underlying pricing power is the PPI excluding food, beverages and trade services. It rose 0.3% in August (0.3% y/y) for the third consecutive month.

A 0.4% decline (+0.2% y/y) in food prices held back the change in the PPI overall. Energy prices eased 0.1% (-12.4% y/y) as gasoline prices were off 1.4% (-29.7% y/y). Natural gas prices increased 0.5% both m/m and y/y. Electric power costs edged 0.1% higher (-0.1% y/y).

Final demand goods prices less food & energy rose 0.3% last month (0.8% y/y) for the second consecutive month. Prices for finished consumer goods less food & energy rose 0.3%, also for the second consecutive month and the 1.4% y/y increase was improved from a low of 1.0% in May. Core nondurable goods prices rose 0.2% (1.8% y/y). Women's apparel prices increased an accelerated 0.7% y/y but men's clothing costs rose a lessened 0.3% y/y. Durable consumer product prices improved 0.8% y/y as household appliance prices surged 1.6% y/y, improved from a 1.1% y/y decline in January.

For businesses, private capital equipment prices inched 0.1% higher last month and the y/y gain recently has been steady near 1.1% in 2020.

Services prices for final demand rose a steady 0.5% in August (0.4% y/y). Trade services prices strengthened 1.2% (1.6% y/y) after a 0.8% increase as the cost of trade of finished goods jumped 1.3% (1.7% y/y). A 0.2% increase (-5.2% y/y) in transportation & warehousing services prices offset the increase. Excluding these costs, trade services prices improved 0.3% (0.6% y/y) after a 0.4% rise.

The cost of construction weakened 0.2% last month (+1.8% y/y) following a 0.6% increase.

Intermediate product prices improved 0.6% (-2.6% y/y), strong for the third straight month.

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, %) Aug Jul Jun Aug Y/Y 2019 2018 2017
Final Demand 0.3 0.6 -0.2 -0.2 1.7 2.9 2.3
   Excluding Food & Energy 0.4 0.5 -0.3 0.6 2.1 2.6 1.9
   Excluding Food, Energy & Trade Services 0.3 0.3 0.3 0.3 2.0 2.9 2.1
   Goods 0.1 0.8 0.2 -1.6 0.4 3.4 3.4
      Foods -0.4 -0.5 -5.2 0.2 1.8 0.2 1.2
      Energy -0.1 5.3 7.7 -12.4 -4.4 10.1 10.6
    Goods Excluding Food & Energy 0.3 0.3 0.1 0.8 1.4 2.5 2.2
   Services 0.5 0.5 -0.3 0.4 2.2 2.6 1.8
      Trade Services 1.2 0.8 -1.8 1.6 2.5 1.8 1.5
   Construction -0.2 0.6 -0.3 1.8 4.9 4.1 2.2
Intermediate Demand - Processed Goods 0.6 1.5 0.9 -2.6 -1.4 5.4 4.7
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