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Economy in Brief

U.S. Producer Price Index Posts Record Increase in 2021
by Tom Moeller  January 13, 2022

• Core goods prices accelerate sharply y/y.

• Service prices jump.

• Energy & food prices soar y/y.

The Producer Price Index for Final Demand increased 9.7% y/y with the index rising 0.2% in December following a 1.0% November gain. A 0.4% December rise had been expected by the Action Economics Forecast Survey. The PPI excluding food and energy rose 8.3% during all of last year and 0.5% in December after increasing 0.9% in November. Expectations had been for a 0.5% gain. The PPI less food, energy and trade services rose 6.9% y/y including a 0.4% December gain and a 0.8% November rise. These series date back to 2010.

Lower energy prices held back the increase in the December PPI dropping 3.3% as the Omicron variant emerged. Energy prices rose, however, by roughly one-third y/y. Gasoline prices fell 6.1% (+65.8% y/y) and reversed November's increase. Home heating oil prices weakened 2.7% (+52.2% y/y) and also reversed the prior month's increase. Natural gas prices fell 1.4% last month (+25.3% y/y) but the cost of electric power rose 1.2% (6.3% y/y).

Food prices eased 0.6% (+12.9% y/y) following a 1.3% November increase. Beef & veal prices declined 8.6% (+28.9% y/y) but the cost of dairy products increased 2.7% (7.0% y/y). Vegetable prices rose 20.4% y/y while egg prices strengthened 81.9% y/y.

Final demand for goods prices less foods & energy rose 0.5% (9.4% y/y) after a 0.8% November rise. Finished consumer goods prices less good & energy rose 0.6% in December (6.4% y/y), the same as in November. Core nondurable consumer goods prices improved 0.6% (5.8% y/y) following a 0.7% rise. Durable consumer goods prices rose 0.6% last month (7.4% y/y) after moving 0.5% higher in November. Prices for private capital equipment strengthened 0.6% (5.9% y/y), the same as in November.

Services prices rose 0.5% in December (7.9% y/y) following a 0.9% rise. Trade services prices rose 0.8% (13.3% y/y). Services prices less trade, transportation & warehousing rose 0.2% (4.5% y/y) following a 0.6% increase in November.

Construction product prices rose 0.3% (12.4% y/y) for the second consecutive month. Construction costs for private capital investment rose 0.4% (13.4% y/y) after improving 0,3% in November.

Intermediate goods prices jumped fell 0.3% (+24.4% y/y) due to a 4.1% decline (+34.1% y/y) in processed fuel costs.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's USECON database. Further detail is contained in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

The Fed's latest Beige Book covering regional economic conditions may be found here.

Producer Price Index (SA, %) Dec Nov Oct Dec Y/Y 2021 2020 2019
Final Demand 0.2 1.0 0.6 9.7 7.0 0.2 1.7
   Excluding Food & Energy 0.5 0.9 0.4 8.3 5.6 0.9 2.1
   Excluding Food, Energy & Trade Services 0.4 0.8 0.3 6.9 5.1 0.7 2.0
   Goods -0.4 1.1 1.3 13.4 10.5 -1.4 0.4
      Foods -0.6 1.3 -0.3 12.9 8.8 1.3 1.8
      Energy -3.3 2.0 5.5 31.4 30.2 -12.6 -4.6
    Goods Excluding Food & Energy 0.5 0.8 0.6 9.4 6.5 0.8 1.4
   Services 0.5 0.9 0.2 7.9 5.3 0.9 2.3
      Trade Services 0.8 1.2 0.7 13.3 7.3 1.6 2.4
   Construction 0.3 0.3 6.0 12.4 5.2 2.3 5.0
Intermediate Demand - Processed Goods -0.3 1.6 2.4 24.4 19.4 -2.8 -1.4
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