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Economy in Brief

U.S. Producer Price Strength Led by Energy
by Tom Moeller  June 15, 2016

The headline Final Demand Producer Price Index increased 0.4% (-0.1% y/y) in May following an unrevised 0.2% April rise. A 0.3% rise had been expected in the Action Economics Forecast Survey. A 2.8% gain in energy prices (-14.6% y/y) was accompanied by a 0.3% increase (-2.6% y/y) in food prices. Excluding food & energy, the PPI strengthened 0.3% (1.2% y/y), the quickest rise since January. Expectations were for a 0.1% increase.

On the energy price front, the jump in prices was driven by a 6.6% increase (-28.8% y/y) in gasoline prices which added to strength during the prior two months. Home heating oil prices also increased 18.7% (-37.7% y/y) following a 30.5% drop. Natural gas prices rebounded 1.9% (-3.2% y/y), but electric power costs eased 0.6% (-3.2% y/y) and reversed a 0.6% rise.

The increase in food prices reflected a 7.4% gain in egg prices, down by one half y/y, as well as a 10.2% rise (4.9% y/y) in vegetable costs. Beef & veal prices fell 5.2% (-20.8% y/y) while dairy product prices eased 1.3% (-3.8% y/y).

Core producer goods prices for final demand increased 0.3% (0.7% y/y), the same as in April. These gains followed four consecutive 0.1% up ticks. Durable consumer goods prices rose 0.3% (0.6% y/y), but core nondurable goods costs remained steady (3.9% y/y) following a 0.6% rise. Capital equipment prices edged 0.1% higher (0.5% y/y).

The 0.2% service price increase (1.4% y/y) was the firmest since January. It reflected a 3.0% jump (7.0% y/y) in capital equipment trade. Personal consumption trade prices improved 0.6% (1.4% y/y) while government goods trade prices increased 2.1% (2.4% y/y). Passenger transportation prices decreased 2.5% (-6.5% y/y). Prices for transportation & warehousing of goods eased 0.1% (-1.7% y/y). Service prices excluding each of these categories fell 0.2% (+1.3% y/y).

Construction costs for final demand gained 0.1% (1.9% y/y) after a 0.8% increase.

Prices for intermediate processed goods jumped 0.8% (-4.6% y/y), the strongest rise in twelve months.

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, %) May Apr Mar May Y/Y 2015 2014 2013
Final Demand 0.4 0.2 -0.1 -0.1 -0.9 1.6 1.4
   Excluding Food & Energy 0.3 0.1 -0.1 1.2 0.8 1.7 1.5
   Excluding Food, Energy & Trade Services -0.1 0.3 0.0 0.8 0.6 1.2 --
   Goods 0.7 0.2 0.2 -2.6 -4.3 1.3 0.8
      Foods 0.3 -0.3 -0.9 -2.6 -2.6 3.2 1.7
      Energy 2.8 0.2 1.8 -14.6 -20.6 -0.9 -0.8
      Goods Excluding Food & Energy 0.3 0.3 0.1 0.7 0.4 1.5 1.1
   Services 0.2 0.1 -0.2 1.4 0.9 1.8 1.6
   Construction 0.1 0.8 0.1 1.9 1.9 2.9 1.8
Intermediate Demand - Processed Goods 0.8 0.3 -0.2 -4.6 -6.9 0.6 0.0
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