Global| Oct 10 2018U.S. Producer Prices Decline Unexpectedly
by:Tom Moeller
|in:Economy in Brief
Summary
The headline Final Demand Producer Price Index using new methodology eased 0.1% during August (+2.8% y/y) after holding steady in July. It was the first decline since February 2017. A 0.2% increase had been expected in the Action [...]
The headline Final Demand Producer Price Index using new methodology eased 0.1% during August (+2.8% y/y) after holding steady in July. It was the first decline since February 2017. A 0.2% increase had been expected in the Action Economics Forecast Survey. The PPI excluding food & energy also slipped 0.1% (+2.3% y/y) and reversed the July gain. A 0.2% rise had been expected. The PPI excluding food, beverages and trade services is another measure of underlying price inflation. It rose 0.1% (2.9% y/y) in August following two months of 0.3% increase.
The PPI using the old methodology held steady (3.6% y/y) following a 0.2% gain. Prices excluding food & energy eased 0.1% (+2.4% y/y) after a 0.2% rise.
A 0.9% decline (+0.8% y/y) in trade services prices provided downward pressure on the overall PPI last month. It followed a 0.8% shortfall in July. The cost of trade of finished products fell 0.8% (+0.5% y/y) for the second straight month. Trade of government purchased goods dropped 1.1% (+0.7% y/y), down for the third consecutive month. Passenger transportation prices slipped 1.9% (+3.0% y/y) while transportation & warehousing of goods costs eased 0.1% (+6.4% y/y).
Goods prices excluding food & energy held steady last month following six months of 0.3% increase earlier this year. The 2.7% y/y rise followed slight y/y declines as of late-2015. Core nondurable goods pries were unchanged (+3.3% y/y), but durable goods prices gained 0.1%, the weakest increase in six months. Price increases for durables have accelerated to 1.9% y/y from little-change in mid-2016. Household furniture prices increased 0.1% (2.6 y/y) but appliance costs declined 0.1% (+2.8% y/y). Capital equipment prices rose 0.2% m/m. The 1.9% y/y increase also was accelerated from 0.3% as of mid-2016. Government purchased goods prices less food & energy rose 0.2% and increased 2.3% y/y, following price deflation in 2016.
Food prices also weakened during August by 0.6% (-1.0% y/y), the fourth decline in the last five months. Fresh fruit & vegetable prices dropped 11.3% (+0.1% y/y) while beef & veal prices weakened 1.9% (-4.3% y/y). Dairy product costs declined 1.2% (-3.7% y/y) for a second straight month. Offsetting these declines was a 4.5% rise (8.1% y/y) in grain prices. Energy product prices rose 0.4% (13.6% y/y) as natural gas prices strengthened 1.8% (0.0% y/y). Gasoline prices rose 0.6% (28.1% y/y) and the cost of electric power also increased 0.6% (1.5% y/y). Home heating oil prices declined 0.9% (+39.6% y/y).
Construction prices inched 0.1% higher (3.2% y/y) following a 0.4% rise.
Prices for intermediate demand processed goods held steady (6.3% y/y) for the second straight month. Monthly price increases during Q2 ranged between 0.4% and 1.3%.
The PPI data are contained in Haver's USECON database with further detail in PPI and PPIR. West Texas Intermediate Crude Oil prices are found in the WEEKLY database while the expectations figures are available in the AS1REPNA database.
| Producer Price Index (SA, %, New Methodology) | Sep | Aug | Jul | Sep Y/Y | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|---|---|
| Final Demand | -0.1 | 0.0 | 2.8 | 2.3 | 0.4 | -0.9 | |
| Excluding Food & Energy | -0.1 | 0.1 | 2.3 | 1.9 | 1.2 | 0.8 | |
| Excluding Food, Energy & Trade Services | 0.1 | 0.3 | 2.9 | 2.1 | 1.2 | 0.6 | |
| Goods | 0.0 | 0.1 | 3.9 | 3.3 | -1.4 | -4.3 | |
| Foods | -0.6 | -0.1 | -1.0 | 1.2 | -2.8 | -2.6 | |
| Energy | 0.4 | -0.5 | 13.6 | 10.4 | -8.4 | -20.6 | |
| Goods Excluding Food & Energy | 0.0 | 0.3 | 2.7 | 2.2 | 0.7 | 0.4 | |
| Services | -0.1 | -0.1 | 2.2 | 1.8 | 1.4 | 0.9 | |
| Trade Services | -0.9 | -0.8 | 0.8 | 1.5 | 1.3 | 1.3 | |
| Construction | 0.1 | 0.4 | 3.2 | 2.2 | 1.1 | 1.9 | |
| Intermediate Demand - Processed Goods | 0.0 | 0.0 | 6.3 | 4.7 | -3.1 | -6.9 |
Wholesale Inventories Jumped in July While Sales
Floundered Wholesale inventories jumped 0.6% m/m (5.0% y/y) in July
following an unrevised 0.1% m/m increase in June. The July increase is a little
smaller than expected--the Informa Global Markets Survey had looked for a 0.7%
m/m increase. Also, this increase was slightly smaller than the 0.7% m/m rise
contained in the advance report released two weeks ago. The advance in durable goods inventories slowed in July with
a 0.8% m/m (6.1% y/y) rise versus a 0.9% m/m increase in June. Automotive (-1.1%
m/m) and miscellaneous durable goods inventories (-0.9% m/m) each fell while all
other categories experienced monthly increases. Inventories of computing
equipment led the July rise with a 3.8% m/m increase with metals inventories
posting a robust 3.1% m/m gain. A rebound in nondurable goods inventories led
the overall July surge. These inventories rose 0.3% m/m (3.3% y/y) in July after
having fallen 1.0% m/m in June. The recovery in nondurable inventories was
largely propelled by paper inventories (2.0% m/m) and farm inventories (1.4%
m/m). Wholesale sales were essentially unchanged in July (+9.8%
y/y) from June after a downwardly revised 0.2% m/m decline in June (initially
reported as a 0.1% m/m fall). The Action Economics Survey had looked for a 0.3%
m/m increase. Sales of durable goods were unchanged in July (+9.6% y/y)
versus a 0.2% m/m rise in June. Sales of computing equipment fell 4.0% m/m and
sales of furniture slipped 3.2% m/m. Hardware sales posted the largest monthly
increase with a 1.7% m/m gain. Sales of nondurable goods declined 0.1% m/m
(+10.0% y/y) following a 0.6% m/m slump in June. Apparel sales continued to fall
with an outsized 6.4% m/m drop in July. With inventories rising and sales unchanged, the
inventory-to-sales (I/S) ratio at the wholesale level edged up to 1.26 in July
from 1.25 in each of the previous two months. This is still the second lowest
reading since December 2014. The I/S ratio for durable goods increased to 1.59 from 1.58,
its second consecutive monthly increase while the I/S ratio for nondurables was
unchanged at 0.95, its lowest reading since December 2014. With weak furniture
sales in July, this sector's I/S ratio jumped to 1.84 from 1.78. Similarly, for
apparel: the sharp drop in sales was accompanied by a surge in this sector's I/S
ratio to 2.15 from 2.00. And the I/S ratio for petroleum and products continued
its general decline, falling to 0.37 in July, its lowest level since November
2014. The wholesale trade figures are available in Haver's USECON
database. The expectations figure for inventories is contained in the MMSAMER
database. Expectations for sales are in the AS1REPNA database.
by Tom Moeller
October 10, 2018
Wholesale Sector - NAICS
Classification (%)
Aug
Jul
Jun
Y/Y
2017
2016
2015
Inventories
0.6
0.1
5.0
3.6
2.2
1.3
Sales
0.0
-0.2
9.8
7.4
-1.3
-4.9
I/S Ratio
1.26
1.25
1.32 (Jul '17)
1.30
1.35
1.33
U.S. Energy Product Prices Strengthen
by Tom Moeller October 10, 2018
Gasoline prices increased to $2.90 per gallon last week (15.9% y/y), up three cents from the prior week. Haver Analytics constructs factors to adjust for the marked seasonal variation in prices. The seasonally-adjusted gasoline price rose w/w to $2.85 per gallon from $2.80.
West Texas Intermediate crude oil prices strengthened last week to $75.12 per barrel (49.6% y/y), the highest level since November 2014. Yesterday, the price eased to $74.96. Brent crude oil prices increased to $85.52 (40.4% y/y) per barrel last week. The price was $85.16 yesterday.
Natural gas prices rose to 3.06/mmbtu (3.4% y/y) last week. The price was $3.13 on Monday.
During the latest four weeks, gasoline demand decreased 1.5% y/y; total petroleum product demand rose 1.1% y/y. Gasoline inventories strengthened 7.4% y/y, but inventories of all petroleum products declined 3.0% y/y as residual fuel oil inventories fell 23.5% y/y. Crude oil input to refineries strengthened 11.3% y/y in the last four weeks.
These data are reported by the U.S. Department of Energy. The price data can be found in Haver's WEEKLY and DAILY databases. Greater detail on prices, as well as the demand, production and inventory data, along with regional breakdowns, are in OILWKLY.
| Weekly Energy Prices | 10/08/18 | 10/01/18 | 09/24/18 | Y/Y % | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|---|---|
| Retail Gasoline ($ per Gallon Regular, Monday Price) | 2.90 | 2.87 | 2.84 | 15.9 | 2.47 | 2.31 | 2.03 |
| Light Sweet Crude Oil, WTI ($ per bbl, Previous Week's Average) | 75.12 | 72.70 | 70.29 | 49.6 | 50.87 | 43.22 | 48.90 |
| Natural Gas ($/mmbtu, LA, Previous Week's Average) | 3.06 | 3.03 | 2.93 | 3.4 | 2.99 | 2.51 | 2.64 |
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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