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Economy in Brief

U.S. Producer Prices Show Unexpected Strength in September
by Tom Moeller  October 12, 2022

• Food & energy prices move higher.

• Core price increase picks up.

• Services prices continue to rise.

The Producer Price Index for Final Demand increased 0.4% during September after falling 0.2% in August, revised from -0.1%. The 0.4% July decline was unrevised. During the last 12 months, the PPI increase moderated to 8.5% from an 11.7% March peak. A 0.2% September PPI gain had been expected in the Action Economics Forecast Survey.

The Producer Price Index less food, energy & trade services increased 0.4% (5.6% y/y) following unrevised gains of 0.2% in August and 0.1% in July. The PPI excluding just food & energy rose 0.3% last month. A 0.3% increase had been expected.

The rise in the September PPI was paced by a 1.2% increase (11.9% y/y) in food prices after they eased 0.1% in August. Fresh & dried vegetable prices surged 15.7% (40.2% y/y) while egg prices strengthened 16.7% (97.3% y/y). Beef & veal prices weakened 4.6% (-23.0% y/y) and dairy product prices declined 1.6% (+18.2% y/y).

Energy prices rose 0.7% (24.2% y/y), following two straight months of sharp decline. Gasoline prices weakened 2.0% (+18.1% y/y). Home heating oil prices surged 10.7% (73.2% y/y). Natural gas costs jumped 2.6% (25.5% y/y) while electric power costs edged 0.1% higher (12.7% y/y).

The PPI for goods less food & energy held steady (7.5% y/y) in September following two straight months of 0.2% increase. These recent readings are the slowest since late in 2020. Finished consumer goods prices less food & energy increased 0.2% (8.0% y/y) following a 0.5% August rise. Durable consumer goods prices ticked 0.1% higher (7.3% y/y) while core nondurable consumer goods prices rose 0.3% (8.4% y/y). Prices for private capital equipment improved 0.3% in September (8.8% y/y) after rising 0.4% in August. Core government goods prices held steady (8.9% y/y).

Services prices increased 0.4% (6.8% y/y) in September after a 0.3% August gain. Trade services prices improved 0.1% (12.7% y/y) after rising 0.5% in August. Services prices less trade, transportation & warehousing strengthened 0.6% (2.7% y/y) after rising 0.4% in August.

Construction product prices rose 0.4% in September (23.1% y/y) after rising 0.3% in August and 5.0% in July. Construction product prices for private capital investment rose 0.4% (25.4% y/y) and government construction costs gained 0.4% (18.9% y/y).

Intermediate goods prices edged 0.1% higher (13.1% y/y) in September following two consecutive months of sharp decline. Processed fuel costs rose 2.6% (33.8% y/y), after declining sharply in the prior two months.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's USECON database. Further detail is contained in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

The minutes to the latest FOMC meeting can be found here.

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