Global| Jun 13 2006PPI Tame, Core firm
by:Tom Moeller
|in:Economy in Brief
Summary
The finished goods producer price index rose 0.2% during May after the 0.9% spike in April. Consensus expectations had been for a 0.4% rise. Prices less food & energy, however, were a bit firmer than expected during May. The 0.3% gain [...]
The finished goods producer price index rose 0.2% during May after the 0.9% spike in April. Consensus expectations had been for a 0.4% rise.
Prices less food & energy, however, were a bit firmer than expected during May. The 0.3% gain in the core PPI compared to Consensus expectations for a 0.2% rise and followed two months of 0.1% increase. During the last ten years there has been a 47% correlation between the y/y change in core producer prices and the change in the core CPI for goods. Over the last twenty years the correlation has been 78%.
Prices of all finished consumer goods less food & energy rose 0.2% (1.7% y/y). Durable consumer goods prices ticked up 0.1% (0.4% y/y) after an unchanged April reading. However, core consumer nondurable prices rose 0.4% (2.6% y/y). Capital equipment prices also were firm and rose 0.3% (1.4% y/y).
Finished energy prices rose 0.4% (20.1% y/y) after a 4.0% April spike. Gasoline prices rose 2.2% (42.4% y/y) and home heating oil rose 2.6% (39.4% y/y). Natural gas prices fell for the fourth month this year. The 3.1% decline nevertheless left prices up 9.4% versus one year ago.
Intermediate goods prices jumped another 1.1% as energy prices rose 1.1% (20.7% y/y). Core intermediate prices also jumped 1.1%.
Crude goods prices surged 2.0% as energy prices rose 2.5% (14.9% y/y). That gain, however, was eclipsed by a 6.2% jump in core crude prices. Copper base scrap (89.0% y/y), aluminum scrap (46.9% y/y) and iron & steel scrap (32.0% y/y) prices added to earlier strong gains. 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 | May | April | Y/Y | 2005 | 2004 | 2003 |
|---|---|---|---|---|---|---|
| Finished Goods | 0.2% | 0.9% | 4.3% | 4.9% | 3.6% | 3.2% |
| Core | 0.3% | 0.1% | 1.6% | 2.4% | 1.5% | 0.2% |
| Intermediate Goods | 1.1% | 0.9% | 8.8% | 8.0% | 6.6% | 4.7% |
| Core | 1.1% | 0.4% | 6.3% | 5.5% | 5.7% | 2.0% |
| Crude Goods | 2.0% | 1.2% | 8.7% | 14.6% | 17.5% | 25.1% |
| Core | 6.2% | 4.7% | 26.8% | 4.8% | 26.5% | 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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