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Economy in Brief

Producer Prices Turn Up in July, But Subgroups Decidedly Mixed
by Carol Stone August 17, 2010

The producer price index for finished goods turned back higher in July, gaining 0.2% after June's 0.5% drop. The July rise pushed the year-on-year performance to a sharp 4.2% increase, compared with 2.7% registered in June. Both the food-and-energy portion and the "core" participated.

Finished food prices rose 0.7%, following a 2.2% fall in June. Fresh fruits and vegetables both contributed, jumping 3.8% and 9.8%, respectively, while meat prices were mixed. Beef and pork fell, 6.4% and 0.8%, while chicken, turkey and fish prices were up, 0.8%, 0.9% and 1.2%, in order. All of these but turkey had declined in June. Finished energy prices continued to fall overall, down 0.9% after 1.5% in June, but among various kinds, they showed diverse movement: gasoline was down 2.2% and home heating oil, 3.5%, but wholesale residential electricity prices increased 1.2% after 0.7% in June – we'd surmise due to the unrelentingly hot weather – and residential gas gained 3.1% after 2.1% in June.

Core consumer goods prices were up 0.4% last month, continuing a moderate uptrend that saw 0.3% in May and 0.2% in June. Pharmaceuticals and furniture led the increase; footwear prices turned up, but apparel prices declined. Passenger car prices rose 0.3%. Capital equipment prices rose 0.3% after being flat in June; light trucks had the biggest increase, 1.5%.

Intermediate goods prices remained soft, falling 0.4% in July after 0.9% in June (but up 6.4% from a year ago); intermediate energy was down 0.7% last month and intermediate foods and feeds were also down 0.4%, as was the associated core index (which was up 4.8% from July 2009). Crude goods prices turned noticeably higher, 2.7% in the month after drops of 2.8% in May and 2.4% in June. Food and feed prices gained 3.3% in July and crude energy prices 4.5%; the core rate, however, was -1.4%, after drops of 1.6% in May and 4.8% in June. The rise in foods came in grains and soybeans, and that in energy from a sizable 11.7% increase in natural gas; crude petroleum declined 0.1%. The crude core index saw a 7.4% surge in iron ore, but most metal scrap prices declined.

The mixed performance of many of these wholesale and raw material prices looks to us like a mirror of the economy as a whole: muddling along with gains in one place and then another without much evidence so far of a cumulative, coordinated development of upward momentum. The PPI data are contained in Haver's USECON database, with further detail in PPI and PPIR.

Producer Price Index (%) July June May Year Ago 2009 2008 2007
Finished Goods 0.2 -0.5 -0.3 4.2 -2.5 6.4 3.9
  Less Food & Energy 0.3 0.1 0.2 1.5 2.6 3.4 2.0
Intermediate Goods -0.4 -0.9 0.4 6.4 -8.4 10.3 4.0
  Less Food & Energy -0.4 -0.4 0.3 4.8 -4.2 7.4 2.8
Crude Materials 2.7 -2.4 -2.8 20.5 -30.3 21.4 11.9
  Less Food & Energy -1.4 -4.8 -1.6 25.0 -23.5 14.8 15.6
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