Global| Jan 13 2006PPI Rise Doubled Expectations
by:Tom Moeller
|in:Economy in Brief
Summary
The Producer Price Index for Finished Goods doubled Consensus expectations for a 0.4% increase and posted a 0.9% gain in December. It was the strongest increase in four months and lifted the year to year rise to 4.9%, the strongest [...]
The Producer Price Index for Finished Goods doubled Consensus expectations for a 0.4% increase and posted a 0.9% gain in December. It was the strongest increase in four months and lifted the year to year rise to 4.9%, the strongest since 1990.
Energy prices rose a firm 3.1% (24.5% y/y) as gasoline prices reversed the prior month's decline and rose 12.3% (41.7% y/y). Home heating oil prices rose 2.7% (41.5% y/y) though residential natural gas prices slipped for the second month, down 2.7% (+29.2% y/y).
Strength in finished food prices accounted for much of last month's surprise. A 0.9% increase was the strongest since September but that lest the annual increase at 2.0%, less than half the 2004 rise.
"Core" producer prices rose the same 0.1% as during November and the gain was half the Consensus expectation for a 0.2% increase.
Prices of finished consumer goods less food & energy rose a modest 0.1% (2.0% y/y). Durable goods prices rose 0.1% (-0.2% y/y) after two months of decline. Capital equipment prices rose for the first month in three by 0.1% (1.3% y/y).
Intermediate goods prices rose a modest 0.2% and core intermediate goods prices increased 0.3%, the slimmest increase since August.
Crude goods prices fell sharply for the second consecutive month. The 2.3% decline reflected a 5.4% (+44.8% y/y) decline in energy prices. Core crude prices also slipped marginally after the 5.4% in November. During the last thirty years "core" crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
| Producer Price Index | Dec | Nov | Y/Y | 2005 | 2004 | 2003 |
|---|---|---|---|---|---|---|
| Finished Goods | 0.9% | -0.7% | 5.7% | 4.9% | 3.6% | 3.2% |
| Core | 0.1% | 0.1% | 1.7% | 2.4% | 1.5% | 0.2% |
| Intermediate Goods | 0.2% | -1.2% | 8.5% | 8.0% | 6.6% | 4.6% |
| Core | 0.3% | 0.5% | 4.4% | 5.4% | 5.7% | 2.0% |
| Crude Goods | -2.3% | -1.2% | 21.7% | 14.5% | 17.5% | 25.1% |
| Core | -0.0% | 5.4% | 4.5% | 4.9% | 26.6% | 12.4% |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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