BLS U S Bureau of Labor Statistics : Producer Price Index

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PRODUCER PRICE INDEXES - DECEMBER 2016

The Producer Price Index for final demand increased 0.3 percent in December, seasonally adjusted, the

U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.4 percent in November and were unchanged in October. (See table A.) On an unadjusted basis, the final demand index climbed

1.6 percent in 2016 after falling 1.1 percent in 2015.

In December, nearly 80 percent of the advance in the final demand index is attributable to a 0.7-percent increase in prices for final demand goods. The index for final demand services inched up 0.1 percent.

Prices for final demand less foods, energy, and trade services moved up 0.1 percent in December after rising 0.2 percent in November. In 2016, the index for final demand less foods, energy, and trade services climbed 1.7 percent following a 0.3-percent advance in 2015.

Chart 1. One-month percent changes in selected PPI final demand price indexes, seasonally adjusted

Percent change

1.0

0.5

0.0

-0.5

-1.0

Dec'15 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec'16 Final demand Final demand goods Final demand services

Chart 2. Twelve-month percent changes in selected PPI final demand price indexes, not seasonally adjusted

Percent change

2.0

1.0

0.0

-1.0

-2.0

-3.0

-4.0

Dec'15 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec'16

Final demand Final demand goods Final demand services

Final Demand

Final demand goods: Prices for final demand goods jumped 0.7 percent in December, the largest increase since a 0.7-percent rise in June. Sixty percent of the December broad-based advance can be traced to the index for final demand energy, which climbed 2.6 percent. Prices for final demand goods less foods and energy rose 0.3 percent, and the final demand foods index increased 0.7 percent.

Product detail: Accounting for almost half of the December jump in final demand goods prices, the index for gasoline climbed 7.8 percent. Prices for light motor trucks, jet fuel, iron and steel scrap, chicken eggs, and liquefied petroleum gas also increased. In contrast, the index for fresh fruits and melons fell 13.6 percent. Prices for residential electric power and for plastic resins and materials also decreased. (See table 4.)

Final demand services: The index for final demand services inched up 0.1 percent in December after increasing 0.5 percent in November. About 70 percent of the December advance can be attributed to prices for final demand services less trade, transportation, and warehousing, which rose 0.2 percent. The index for final demand trade services also advanced 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand transportation and warehousing services declined 0.4 percent.

Product detail: Most of the December increase in the index for final demand services can be traced to prices for securities brokerage, dealing, investment advice, and related services, which advanced 4.4 percent. The indexes for machinery, equipment, parts, and supplies wholesaling; apparel, footwear, and accessories retailing; food retailing; and health, beauty, and optical goods retailing also moved higher. In contrast, prices for airline passenger services fell 2.4 percent. The indexes for fuels and lubricants retailing, loan services (partial), and apparel wholesaling also decreased.

Intermediate Demand by Commodity Type

Within intermediate demand in December, prices for processed goods advanced 0.5 percent, the index for unprocessed goods jumped 8.3 percent, and prices for services rose 0.4 percent. (See tables B and C.)

Processed goods for intermediate demand: Prices for processed goods for intermediate demand moved up

0.5 percent in December, the fourth straight increase. In December, over 70 percent of the broad-based rise can be traced to the index for processed energy goods, which advanced 2.1 percent. Prices for processed materials less foods and energy and for processed foods and feeds also moved up, rising 0.1 percent and 0.8 percent, respectively. In 2016, the index for processed goods for intermediate demand climbed 1.8 percent compared with a 6.6-percent drop in 2015.

Product detail: A major factor in the December advance in the index for processed goods for intermediate demand was jet fuel prices, which increased 12.1 percent. The indexes for gasoline; paperboard; utility natural gas; liquefied petroleum gas; and natural, processed, and imitation cheese also moved higher.

Conversely, prices for plastic resins and materials declined 3.3 percent. The indexes for lubricating oil base stocks and for beef and veal also fell. (See table 5.)

Unprocessed goods for intermediate demand: Prices for unprocessed goods for intermediate demand jumped 8.3 percent in December, the largest increase since a 9.0-percent advance in February 2007. In December, 60 percent of the broad-based increase is attributable to a 14.6-percent advance in the index for unprocessed energy materials. Prices for unprocessed foodstuffs and feedstuffs and for unprocessed nonfood materials less energy also moved higher, rising 5.8 percent and 3.6 percent, respectively. In 2016, the index for unprocessed goods for intermediate demand jumped 13.2 percent following a 25.3-percent drop in 2015.

Product detail: In December, over one-third of the increase in prices for unprocessed goods for intermediate demand can be traced to the index for crude petroleum, which advanced 18.9 percent. Prices for natural gas, raw milk, slaughter barrows and gilts, iron and steel scrap, and slaughter steers and heifers also increased. In contrast, the index for fresh fruits and melons fell 13.6 percent. Prices for coal and phosphates also moved lower.

Services for intermediate demand: The index for services for intermediate demand advanced 0.4 percent in December following a 0.2-percent increase in November. Almost 60 percent of the broad-based December rise can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which climbed 0.4 percent. Margins for trade services for intermediate demand advanced 1.1 percent, and the index for transportation and warehousing services for intermediate demand edged up 0.1 percent. In 2016, prices for services for intermediate demand rose 2.5 percent after increasing 0.5 percent in 2015.

Product detail: A major factor in the December increase in the index for services for intermediate demand was prices for advertising space sales in newspapers, which rose 9.2 percent. The indexes for securities brokerage, dealing, investment advice, and related services; paper and plastics products wholesaling; machinery and equipment parts and supplies wholesaling; metals, minerals, and ores wholesaling; and courier, messenger, and U.S. postal services also advanced. Conversely, prices for loan services (partial) fell

1.7 percent. The indexes for fuels and lubricants retailing and for airline passenger services also moved lower.

Intermediate Demand by Production Flow Stage 4 intermediate demand: The index for stage 4 intermediate demand increased 0.4 percent in December after rising 0.2 percent in November. In December, prices for total services inputs to stage 4 intermediate demand moved up 0.4 percent, and the index for total goods inputs advanced 0.3 percent. Increases in the indexes for securities brokerage, dealing, investment advice, and related services; machinery and equipment parts and supplies wholesaling; paper and plastics products wholesaling; gasoline; natural, processed, and imitation cheese; and metals, minerals, and ores wholesaling outweighed decreases in the indexes for loan services (partial), portfolio management, and fresh fruits and melons. In 2016, prices for stage 4 intermediate demand rose 1.7 percent after declining 1.5 percent in 2015.