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Economy in Brief

U.S. Producer Price Index Increases; Core Prices Hold Steady in October
by Tom Moeller  November 13, 2020

• Food & energy prices strengthen.

• Core goods prices remain stable.

• Service price increase moderates.

The Producer Price Index for final demand rose 0.3% (0.5% y/y) during October following a 0.4% September increase. A 0.2% rise had been expected in the Action Economics Forecast Survey. Underlying pricing power weakened. Producer prices excluding food & energy edged 0.1% higher (1.1% y/y) following two months of 0.4% gain which followed a 0.5% July rise. A 0.3% increase had been expected. Another measure of underlying pricing power is the PPI excluding food, beverages and trade services. It improved 0.2% in October (0.8% y/y), following a 0.4% gain. It was the weakest increase since June.

A 2.4% increase (2.0% y/y) in food prices bolstered the change in the PPI last month. Beef & veal prices increased 2.7% (-5.4% y/y) while egg prices surged 25.5% (54.3% y/y). Energy prices rose 0.8% (-12.4% y/y) as gasoline prices strengthened 5.5% (-28.8% y/y). Home heating oil prices fell 3.3% (-45.3%). Natural gas prices eased 0.2% (+2.5% y/y) while electric power costs fell 1.0% (-0.4% y/y) and reversed September's strength.

Final demand goods prices less food & energy held steady last month (1.2% y/y), the weakest figure since a 0.1% May decline. Prices for finished consumer goods less food & energy were unchanged (1.4% y/y) after edging 0.1% higher. Core nondurable goods prices rose 0.2% (1.7% y/y) following stability in September. Durable consumer product prices fell 0.3% (+0.8% y/y) following a 0.2% increase.

Private capital equipment prices fell 0.2% last month and the 1.1% y/y change compares to a high of 2.9% in January of 2019.

Services prices for final demand rose 0.2% in October (1.2% y/y) following a 0.4% increase. Trade services prices rose a steady 0.2% (2.2% y/y). The cost of trade of finished goods also rose 0.2% (2.2% y/y) after edging 0.1% higher. Transportation & warehousing services prices surged 1.1% (-4.0% y/y), the strongest change since May. Excluding these costs, trade services prices improved 0.1% (1.2% y/y) after a 0.5% rise.

The cost of construction held steady last month (1.2% y/y) following two consecutive 0.2% declines.

Intermediate product prices rose 0.3% (-1.5% y/y) following four straight months of strong increases.

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, %) Oct Sep Aug Oct  Y/Y 2019 2018 2017
Final Demand 0.3 0.4 0.3 0.5 1.7 2.9 2.3
   Excluding Food & Energy 0.1 0.4 0.4 1.1 2.1 2.6 1.9
   Excluding Food, Energy & Trade Services 0.2 0.4 0.3 0.8 2.0 2.9 2.1
   Goods 0.5 0.4 0.1 -1.0 0.4 3.4 3.4
      Foods 2.4 1.2 -0.4 2.0 1.8 0.2 1.2
      Energy 0.8 -0.3 -0.1 -12.4 -4.4 10.1 10.6
    Goods Excluding Food & Energy 0.0 0.4 0.3 1.2 1.4 2.5 2.2
   Services 0.2 0.4 0.5 1.2 2.2 2.6 1.8
      Trade Services 0.2 0.2 1.2 2.2 2.5 1.8 1.5
   Construction 0.0 -0.2 -0.2 1.2 4.9 4.1 2.2
Intermediate Demand - Processed Goods 0.3 1.0 0.6 -1.5 -1.4 5.4 4.7
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