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Category: Economics and Inflation
Date: 16 January 2020 We take a look at the latest (December 2019) US producer inflation for final demand numbers as reported by the Bureau of Labor Statistics.
Producer inflation for final demand increased by only 1.3% in 2019, which is well below the consumer inflation recorded for the same period in the USA |
Inflation rate of various expenditure categories
The BLS had the following to say regarding the December 2019 Producer Price Index (PPI)
The Producer Price Index for final demand edged up 0.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in November and rose 0.4 percent in October. On an unadjusted basis, the final demand index moved up 1.3 percent in 2019, after a 2.6-percent advance in 2018.
The December increase in the final demand index was the result of a 0.3-percent rise in prices for final demand goods. The index for final demand services was unchanged. Prices for final demand less foods, energy, and trade services inched up 0.1 percent in December following no change in November. In 2019, the index for final demand less foods, energy, and trade services climbed 1.5 percent after advancing 2.8 percent in 2018.
Final Demand
Final demand goods: The index for final demand goods rose 0.3 percent in December, the same as in November. Most of the increase in December can be traced to a 1.5-percent advance in prices for final demand energy. The index for final demand goods less foods and energy edged up 0.1 percent. In contrast, prices for final demand foods moved down 0.2 percent.
Product detail: Over 60 percent of the December increase in the index for final demand goods can be attributed to a 3.7-percent advance in gasoline prices. The indexes for diesel fuel, fresh fruits and melons, carbon steel scrap, residential electric power, and pork also moved higher. Conversely, prices for beef and veal fell 7.0 percent. The indexes for jet fuel and for plastic resins and materials also declined. (See table 4.)
Final demand services: Prices for final demand services were unchanged in December following a 0.3-percent decrease in November. In December, a 2.7-percent advance in the index for final demand transportation and warehousing services offset a 0.3-percent decline in margins for final demand trade services and a 0.1-percent decrease in the index for final demand services less trade, transportation, and warehousing. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Product detail: In December, prices for transportation of passengers (partial) jumped 8.5 percent. The indexes for machinery and vehicle wholesaling; machinery and equipment parts and supplies wholesaling; health, beauty, and optical goods retailing; and portfolio management also increased. In contrast, margins for apparel, jewelry, footwear, and accessories retailing declined 3.7 percent. The indexes for chemicals and allied products wholesaling, guestroom rental, fuels and lubricants retailing, and professional and commercial equipment wholesaling also moved lower.
The Producer Price Index for final demand edged up 0.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in November and rose 0.4 percent in October. On an unadjusted basis, the final demand index moved up 1.3 percent in 2019, after a 2.6-percent advance in 2018.
The December increase in the final demand index was the result of a 0.3-percent rise in prices for final demand goods. The index for final demand services was unchanged. Prices for final demand less foods, energy, and trade services inched up 0.1 percent in December following no change in November. In 2019, the index for final demand less foods, energy, and trade services climbed 1.5 percent after advancing 2.8 percent in 2018.
Final Demand
Final demand goods: The index for final demand goods rose 0.3 percent in December, the same as in November. Most of the increase in December can be traced to a 1.5-percent advance in prices for final demand energy. The index for final demand goods less foods and energy edged up 0.1 percent. In contrast, prices for final demand foods moved down 0.2 percent.
Product detail: Over 60 percent of the December increase in the index for final demand goods can be attributed to a 3.7-percent advance in gasoline prices. The indexes for diesel fuel, fresh fruits and melons, carbon steel scrap, residential electric power, and pork also moved higher. Conversely, prices for beef and veal fell 7.0 percent. The indexes for jet fuel and for plastic resins and materials also declined. (See table 4.)
Final demand services: Prices for final demand services were unchanged in December following a 0.3-percent decrease in November. In December, a 2.7-percent advance in the index for final demand transportation and warehousing services offset a 0.3-percent decline in margins for final demand trade services and a 0.1-percent decrease in the index for final demand services less trade, transportation, and warehousing. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Product detail: In December, prices for transportation of passengers (partial) jumped 8.5 percent. The indexes for machinery and vehicle wholesaling; machinery and equipment parts and supplies wholesaling; health, beauty, and optical goods retailing; and portfolio management also increased. In contrast, margins for apparel, jewelry, footwear, and accessories retailing declined 3.7 percent. The indexes for chemicals and allied products wholesaling, guestroom rental, fuels and lubricants retailing, and professional and commercial equipment wholesaling also moved lower.
Intermediate Demand by Commodity Type
Within intermediate demand in December, prices for processed goods edged up 0.1 percent, the index for unprocessed goods rose 1.8 percent, and prices for services advanced 0.4 percent.
Processed goods for intermediate demand:
The index for processed goods for intermediate demand moved up 0.1 percent in December, the third consecutive rise. Most of the increase in December can be attributed to prices for processed energy goods, which rose 1.0 percent. The index for processed foods and feeds edged up 0.1 percent. Conversely, prices for processed materials less foods and energy declined 0.2 percent. In 2019, the index for processed goods for intermediate demand fell 1.7 percent following a 2.8-percent advance in 2018.
Product detail: Leading the December increase in the index for processed goods for intermediate demand, prices for diesel fuel jumped 6.4 percent. The indexes for gasoline, primary basic organic chemicals, fabricated structural metal, and processed young chickens also moved up. In contrast, prices for steel mill products declined 1.8 percent. The indexes for natural gas to electric utilities, beef and veal, and lubricating oil base stocks also fell.
Unprocessed goods for intermediate demand:
The index for unprocessed goods for intermediate demand increased 1.8 percent in December after jumping 3.9 percent in November. Over half of the broad-based rise in December can be traced to prices for unprocessed foodstuffs and feedstuffs, which advanced 2.3 percent. The indexes for unprocessed nonfood materials less energy and for unprocessed energy materials climbed 3.0 percent and 0.4 percent, respectively. In 2019, prices for unprocessed goods for intermediate demand dropped 7.3 percent after advancing 3.7 percent in 2018.
Product detail: A major factor in the December increase in prices for unprocessed goods for intermediate demand was the index for raw milk, which rose 8.8 percent. Prices for crude petroleum, slaughter poultry, carbon steel scrap, slaughter steers and heifers, and fresh fruits and melons also moved higher. Conversely, the index for natural gas fell 4.6 percent. Prices for corn and wastepaper also moved lower.
The chart shows the year on year seasonally adjusted change in producer prices for processed goods.
Within intermediate demand in December, prices for processed goods edged up 0.1 percent, the index for unprocessed goods rose 1.8 percent, and prices for services advanced 0.4 percent.
Processed goods for intermediate demand:
The index for processed goods for intermediate demand moved up 0.1 percent in December, the third consecutive rise. Most of the increase in December can be attributed to prices for processed energy goods, which rose 1.0 percent. The index for processed foods and feeds edged up 0.1 percent. Conversely, prices for processed materials less foods and energy declined 0.2 percent. In 2019, the index for processed goods for intermediate demand fell 1.7 percent following a 2.8-percent advance in 2018.
Product detail: Leading the December increase in the index for processed goods for intermediate demand, prices for diesel fuel jumped 6.4 percent. The indexes for gasoline, primary basic organic chemicals, fabricated structural metal, and processed young chickens also moved up. In contrast, prices for steel mill products declined 1.8 percent. The indexes for natural gas to electric utilities, beef and veal, and lubricating oil base stocks also fell.
Unprocessed goods for intermediate demand:
The index for unprocessed goods for intermediate demand increased 1.8 percent in December after jumping 3.9 percent in November. Over half of the broad-based rise in December can be traced to prices for unprocessed foodstuffs and feedstuffs, which advanced 2.3 percent. The indexes for unprocessed nonfood materials less energy and for unprocessed energy materials climbed 3.0 percent and 0.4 percent, respectively. In 2019, prices for unprocessed goods for intermediate demand dropped 7.3 percent after advancing 3.7 percent in 2018.
Product detail: A major factor in the December increase in prices for unprocessed goods for intermediate demand was the index for raw milk, which rose 8.8 percent. Prices for crude petroleum, slaughter poultry, carbon steel scrap, slaughter steers and heifers, and fresh fruits and melons also moved higher. Conversely, the index for natural gas fell 4.6 percent. Prices for corn and wastepaper also moved lower.
The chart shows the year on year seasonally adjusted change in producer prices for processed goods.
The graphic above shows that All Items (all processed goods inflation seasonally adjusted year on year) was dragged down mostly by energy goods prices which declined by -4.5% year on year. If foods and energy was excluded from processed goods producer inflation the producer inflation rate for processed goods came in at 2.8% year on year. Unprocessed goods producer inflation reported 3.7% year on year growth, compared to processed goods producer inflation that showed a decline of -1.2% which as we mentioned was caused by a significant decline in the producer inflation rate of energy goods
Brief Explanation of Producer Price Indexes
The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measures the average change over time in prices received (price changes) by producers for domestically produced goods, services, and construction. PPIs measure price change from the perspective of the seller. This contrasts with other measures, such as the Consumer Price Index (CPI). CPIs measure price change from the purchaser's perspective. More than 10,000 PPIs for individual products and groups of products are released each month. PPIs are available for the products of virtually every industry in the mining and manufacturing sectors. Over time, new PPIs have been introduced for products of industries in the services and construction sectors of the U.S. economy. As of January 2018, the PPI covered 71 percent of services as measured by 2012 Census revenue, and 31 percent of construction. More than 100,000 price quotations per month are organized into three sets of PPIs: (1) Final demand-Intermediate demand (FD-ID) indexes, (2) commodity indexes, and (3) indexes for the net output of industries and their products. The FD-ID structure organizes products by class of buyer and degree of fabrication as well as by stage of production. The commodity structure organizes products by similarity of end use or product type. The entire output of various industries is sampled to derive price indexes for the net output of industries and their products.
The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measures the average change over time in prices received (price changes) by producers for domestically produced goods, services, and construction. PPIs measure price change from the perspective of the seller. This contrasts with other measures, such as the Consumer Price Index (CPI). CPIs measure price change from the purchaser's perspective. More than 10,000 PPIs for individual products and groups of products are released each month. PPIs are available for the products of virtually every industry in the mining and manufacturing sectors. Over time, new PPIs have been introduced for products of industries in the services and construction sectors of the U.S. economy. As of January 2018, the PPI covered 71 percent of services as measured by 2012 Census revenue, and 31 percent of construction. More than 100,000 price quotations per month are organized into three sets of PPIs: (1) Final demand-Intermediate demand (FD-ID) indexes, (2) commodity indexes, and (3) indexes for the net output of industries and their products. The FD-ID structure organizes products by class of buyer and degree of fabrication as well as by stage of production. The commodity structure organizes products by similarity of end use or product type. The entire output of various industries is sampled to derive price indexes for the net output of industries and their products.