U.S. PPI Gain Eased Last Month, Core Prices Firmed

The increase in U.S. finished producer prices eased last month to 0.2% after the unrevised 1.1% spike during March. The latest gain fell short of Consensus expectations for a 0.4% rise and it was the lightest month to month increase this year.

The price gain's easing owed to a 0.2% (+17.1% y/y) decline in finished energy prices which was led by a 4.6% (+23.0% y/y) decline in gasoline prices. Elsewhere, energy prices were quite strong. Natural gas prices jumped 5.4% (9.1% y/y) and home heating oil prices increased 2.2% (48.6% y/y) after a 13.1% spike during March. Residential electric power prices also were strong and rose 1.2% (5.0% y/y).

Why Do Gasoline Prices React to Things That Have Not Happened? from the Federal Reserve Bank of St. Louis is available here.

Past strength in finished consumer food prices took a breather and they were unchanged (5.1% y/y) after a 1.2% spike during March. The easing was led by a 12.3% (+39.7% y/y) decline in egg prices. Beef & veal prices also continued their recent weakness and fell 1.7% (-4.6% y/y) while fresh vegetable prices fell 4.1% (-16.2% y/y). Coffee prices fell 3.5% (+10.3% y/y). These declines were offset by higher prices for fish, turkeys and chicken.

Less food & energy the increase in finished goods prices accelerated to 0.4% and that was faster than expectations for a 0.3% rise. Prices of core finished consumer goods rose 0.4% (3.6% y/y) due to more strength in nondurable prices which rose 0.3% (4.5% y/y). Durable consumer goods prices also were quite firm and rose 0.5% (2.3% y/y) due to a 0.9% (2.7% y/y) spike in household furniture prices while appliance prices increased 0.4% (0.9% y/y). Capital equipment prices also have firmed and rose 0.3% while the year to year gain rose to 2.3% from 1.4% as of last December.

Intermediate goods prices rose 0.9% after the 2.3% March surge. Excluding food & energy these prices spiked 1.2% due to 1.2% (8.7% y/y) jump in materials prices for manufacturing.

The crude materials PPI surged 3.2% further after the 8.0% March jump. Crude food prices took a breather after recent strength and fell 0.9% (+15.6% y/y). Energy materials prices jumped another 4.1% (52.0% y/y). The core crude materials PPI more than doubled its March increase and jumped 7.9% as prices for iron & steel scrap ballooned 32.2% (57.3% y/y).

This morning's speech by Fed Vice Chairman Donald L. Kohn, The Economic Outlook, is available here.

Producer Price Index (%)	April	March	Y/Y	2007	2006	2005
Finished Goods	0.2	1.1	6.4	3.9	3.0	4.9
Core	0.4	0.2	3.0	1.9	1.5	2.4
Intermediate Goods	0.9	2.3	10.4	4.1	6.4	8.0
Core	1.2	1.1	5.8	2.8	6.0	5.5
Crude Goods	3.2	8.0	34.1	12.1	1.4	14.6
Core	7.9	3.5	24.5	15.7	20.8	4.9