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Economy in Brief

U.S. Producer Prices Continue to Strengthen
by Tom Moeller  March 14, 2017

The headline Final Demand Producer Price Index increased 0.3% during February after a 0.6% January rise. The y/y increase of 2.2% was the strongest since March 2012. The monthly gain exceeded expectations for a 0.1% uptick in the Action Economics Forecast Survey. The PPI excluding food and energy rose 0.3% (1.5% y/y) following a 0.4% increase. A 0.2% rise had been expected.

Prices of trade services strengthened 0.4% following a 0.9% January rise. An updated measure of "core" PPI inflation, final demand prices excluding food, energy, and trade services prices, increased 0.3% (1.8% y/y) following a 0.2% January gain.

Final demand goods prices improved 0.3% (1.8% y/y). Final demand energy prices increased 0.6% (19.2% y/y) as gasoline prices eased 2.5% (+47.5% y/y). Home heating oil prices were little changed (+72.4% y/y) while natural gas prices nudged 0.3% higher (3.8% y/y). Food prices improved 0.3% (-1.8% y/y). Beef & veal prices declined 3.7% (-12.8% y/y) while fruit & melon prices increased 0.7% (-10.2% y/y). Egg prices fell 13.5% (-49.2% y/y), but bakery product prices gained 0.2% (0.1% y/y). Pork prices increased 0.7% (3.6% y/y), and dairy product prices remained unchanged (5.2% y/y).

Nondurable consumer goods prices excluding food & energy improved 0.1% (3.2% y/y). The y/y increase has lost momentum since a 4.1% y/y rise in June 2015. Finished consumer durable goods prices eased 0.1% (0.9% y/y) for the third month in the last four. Private capital goods prices also slipped 0.1%. Here again, the 0.7% y/y increase was below the 1.5% high in mid-2014.

Prices of final demand for services improved 0.4% (1.4% y/y) following a 0.3% rise. Trade services prices increased 0.4% (0.9% y/y) following a 0.9% January increase. Prices for transportation of private passengers held steady (2.5% y/y) after a 3.6% jump, while transportation & warehousing costs increased 0.3% (1.1% y/y).

Final demand construction costs eased 0.1% (+1.2% y/y) following a 0.3% increase.

Prices of processed goods for intermediate demand improved 0.4%. The 5.0% y/y gain compared to 6.6% price deflation during 2015. It was the strongest y/y increase since 2011.

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.

Deficit Reduction and Choices for the Future from the Congressional Budget Office can be found here.

Producer Price Index (SA, %) Feb Jan Dec Feb Y/Y 2016 2015 2014
Final Demand 0.3 0.6 0.2 2.2 0.5 -1.0 1.8
   Excluding Food & Energy 0.3 0.4 0.1 1.5 1.3 0.8 1.8
   Excluding Food, Energy & Trade Services 0.3 0.2 0.1 1.8 1.2 0.6 1.2
   Goods 0.3 1.0 0.6 3.9 -1.5 -4.9 1.4
      Foods 0.3 0.0 0.5 -1.8 -3.2 - 3.1 3.7
      Energy 0.6 4.7 1.8 19.2 -8.2 -25.6 -3.2
      Goods Excluding Food & Energy 0.1 0.4 0.3 2.0 0.8 0.4 1.6
   Services 0.4 0.3 0.1 1.4 1.5 1.0 1.9
      Trade Services 0.4 0.9 0.0 0.9 1.5 1.4 2.0
   Construction -0.1 0.3 -0.1 1.2 1.3 3.2 1.9
Intermediate Demand - Processed Goods 0.4 1.1 0.4 5.0 -5.7 -14.0 1.1
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