U.S. Producer Prices Fall Sharply; Core Prices Ease

The Producer Price Index for final demand declined 0.6% (+1.3% y/y) during February following a 0.5% January rise. It was the largest m/m weakening since January 2015. A 0.1% decline had been expected in the Action Economics Forecast Survey. Producer prices excluding food & energy were off 0.3% (+1.4% y/y) following a 0.5% gain. A 0.1% rise had been expected. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, slipped 0.1% (+1.4% y/y) after rising 0.4% in January. It was the first monthly shortfall in three months.

Final demand goods prices less food & energy eased 0.1% (+0.5% y/y) after a 0.3% rise. The cost of finished consumer goods less food & energy held steady (1.2% y/y) for a second straight month. Core nondurable goods prices edged 0.2% higher (1.9% y/y) and durable product prices eased 0.3%, but were unchanged y/y. Private capital equipment prices also held steady (1.0% y/y) following three straight 0.1% increases.

A 0.3% decline (+1.5% y/y) in services prices for final demand followed a 0.7% increase. Trade services prices fell 0.7% (+1.3% y/y), as the cost of trade of finished goods fell 0.9%. A 0.6% decline in transportation & warehousing prices was the third decline in four months. Excluding these costs, prices eased 0.1% (+1.8% y/y) after improving 0.6%.

Food prices weakened 1.6% (+1.1% y/y) following a 0.2% rise. Final demand energy prices fell 3.6% (+0.2% y/y) as gasoline prices were off 6.5% (+9.8% y/y).

The cost of construction slipped 0.1% (+3.8% y/y) following a 0.8% rise.

Intermediate product prices fell 0.9% (-2.1% y/y) after declining 0.3%.

The PPI data can be found in Haver's USECON database. Further detail can be found in PPI and PPIR. The expectations figures are available in the AS1REPNA database.