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Economy in Brief

U.S. Producer Prices Strengthen Broadly
by Tom Moeller  February 14, 2017

The headline Final Demand Producer Price Index increased 0.6% during January (1.6% y/y) after a 0.2% December gain, revised from 0.3%. The rise was the largest since September 2012 and exceeded expectations for a 0.3% increase in the Action Economics Forecast Survey. The PPI excluding food and energy rose 0.4% (1.2% y/y) following a 0.1% uptick, revised from 0.2%. It was the largest gain since June 2015. A 0.2% rise had been expected.

Prices of trade services jumped 0.9% (0.1% y/y) following no change during December. An updated measure of "core" PPI inflation, final demand prices excluding food, energy, and trade services prices, increased 0.2% (1.6% y/y) following a 0.1% December rise. 

Final demand goods prices jumped 1.0% (3.1% y/y), the strongest rise since May 2015. It reflected a 4.7% increase (14.0% y/y) in energy prices which followed 1.8% gain. This rise was accompanied by no change (-2.2 % y/y) in food prices, which followed two months of 0.5% increase.

Nondurable goods prices excluding food & energy strengthened 0.5% (3.3% y/y) following a 0.1% rise. Finished durable goods prices eased 0.1% (+1.1% y/y) following a 0.1% dip. Private capital goods prices gained 0.1% (0.9% y/y) after improving 0.2%.

Final demand energy prices increased 4.7% (14.5% y/y) as gasoline prices strengthened 12.9% (32.5% y/y). Home heating oil prices gained 14.5% (52.6% y/y), and natural gas prices improved 2.7% (10.3% y/y). Food prices remained unchanged (-2.2% y/y). Beef & veal prices declined 7.2% (-8.1% y/y) and fruit & melon prices eased 0.1% (-4.7% y/y). Egg prices fell by one-third (-27.5% y/y), but bakery product prices gained 0.2% (0.5% y/y). Pork prices increased 5.4% (7.7% y/y), and dairy product prices rose 1.0% (5.0% y/y).

Prices of final demand for services gained 0.3% (0.8% y/y) following a 0.1% uptick. Trade services prices increased 0.9% (0.1% y/y) following no change in December. Prices for transportation of private passengers recovered 3.6% (2.3% y/y) after a 1.7% fall, while transportation & warehousing costs increased 0.4% (0.7% y/y).

Final demand construction costs increased 0.3% (1.3% y/y) following a 0.1% dip.

Prices of processed goods for intermediate demand surged 1.1% (3.8% y/y), the strongest rise since February 2013.

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.

Semiannual Monetary Policy Report to the Congress by Fed Chair Janet L. Yellen is available here.

Producer Price Index (SA, %) Jan Dec Nov Jan Y/Y 2016 2015 2014
Final Demand 0.6 0.2  0.5 1.6 0.4 -0.9 1.6
   Excluding Food & Energy 0.4 0.1 0.5 1.2  1.2 0.8 1.7
   Excluding Food, Energy & Trade Services 0.2 0.1 0.2 1.6 1.2 0.6 1.2
   Goods 1.0 0.6 0.2 3.1 -1.4 -4.3 1.3
      Foods 0.0 0.5 0.5 -2.2 2.7 -2.6 3.2
      Energy 4.7 1.8 0.1 14.0 -8.4 -20.6 -0.9
      Goods Excluding Food & Energy 0.4 0.3 0.2 2.1 0.8 0.4 1.5
   Services 0.3 0.1 0.5 0.8 1.3 0.9 1.8
      Trade Services 0.9 0.0 1.3 0.1 1.2 1.3 1.9
   Construction 0.3 -0.1 0.1  1.3 1.1 1.9 2.9
Intermediate Demand - Processed Goods 1.1 0.4 0.3 3.8 -3.0 -6.9 0.6

 

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