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Economy in Brief

U.S. Producer Prices Ease; Energy Prices Increase
by Tom Moeller  April 13, 2016

The headline Final Demand Producer Price Index dipped 0.1% (-0.1% y/y) in March after an unrevised 0.2% February decline. The easing compared to a 0.3% increase expected in the Action Economics Forecast Survey. A 0.9% decline (-2.5% y/y) in food prices offset a 1.8% increase (-13.8% y/y) in energy prices. Excluding food & energy, the PPI eased 0.1% (+1.0% y/y) versus an expected 0.1% rise.

The decline in food prices reflected a 27.4% drop in egg prices (-30.8% y/y) as well as a 0.4% fall in dairy product prices (-1.5% y/y). These declines were offset by a 0.5% rise (-16.5% y/y) in beef & veal costs as well as a 1.7% jump (+5.1% y/y) in fish & shellfish prices. Pasta product prices gained 0.3% (-2.0% y/y). On the energy price front, the jump in prices was driven by a 7.1% rebound (-27.2% y/y) in gasoline prices as well as a 10.5% surge (-20.7% y/y) in home heating oil prices. Natural gas prices fell 1.5% (-7.5% y/y), and electric power costs eased 0.2% (-0.8% y/y).

A 0.1% improvement (0.3% y/y) in core producer goods prices for final demand was the third increase in the last four months. It reflected the emerging improvement in factory sector activity. Durable consumer goods prices were unchanged (0.4% y/y) and core nondurable goods costs edged 0.1% higher (3.7% y/y), though that was the weakest monthly increase since a decline last October. Capital equipment prices were unchanged (0.4% y/y) for the third consecutive month.

The service price decline of 0.2% (+1.2% y/y) followed no change in prices in February. It reflected a 1.7% drop (+3.9% y/y) in capital equipment trade which reversed the prior month's increase. Personal consumption trade prices remained unchanged 0.6% y/y) while government goods trade prices fell 1.8% (+0.1% y/y). Passenger transportation prices increased 0.7% (-3.6% y/y) following a 0.9% decline. Prices for transportation & warehousing of goods declined 0.6% (-1.8% y/y), off for the fourth straight month. Service prices excluding each of these categories eased 0.1% (+1.7% y/y) following three months of strength.

Construction costs for final demand edged 0.1% higher (1.1% y/y) following four consecutive months of decline.

Prices for intermediate processed goods declined 0.2% (-5.5% y/y). They have been falling since August 2014.

The PPI data are contained in Haver's USECON database with further detail in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

Producer Price Index (SA, %) Mar Feb Jan Mar Y/Y 2015 2014 2013
Final Demand -0.1 -0.2 0.1 -0.1 -0.9 1.6 1.4
   Excluding Food & Energy -0.1 0.0 0.4 1.0 0.8 1.7 1.5
   Excluding Food, Energy & Trade Services 0.0 0.1 0.2 0.9 0.6 1.2 --
   Goods 0.2 -0.6 -0.7 -2.6 -4.3 1.3 0.8
      Foods -0.9 -0.3 1.0 -2.5 -2.6 3.2 1.7
      Energy 1.8 -3.4 -5.0 -13.8 -20.6 -0.9 -0.8
      Goods Excluding Food & Energy 0.1 0.1 0.0 0.3 0.4 1.5 1.1
   Services -0.2 0.0 0.5 1.2 0.9 1.8 1.6
   Construction 0.1 -0.1 -0.4 1.1 1.9 2.9 1.8
Intermediate Demand - Processed Goods -0.2 -0.7 -1.2 -5.5 -6.9 0.6 0.0
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