This Morning’s Key Economic Data - Producer Price Index (October)

November 17, 2009 – This Morning’s Key Economic data includes the Producer Price Index for October, which basically came in line with expectations, indicating that inflationary pressures remain tame. Backing out food and energy, the number was actually down 0.6%.

Excerpt from Press Release:

PRODUCER PRICE INDEXES - OCTOBER 2009

The Producer Price Index for Finished Goods advanced 0.3 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed a 0.6-percent decline in September and a 1.7-percent rise in August. In October, at the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.3 percent and the crude goods index increased 5.4 percent. On an unadjusted basis, from October 2008 to October 2009, prices for finished goods fell 1.9 percent, the eleventh consecutive month of year-over-year declines. (See table A.)

Stage-of-Processing Analysis

Finished goods

The October increase in the index for finished goods can be attributed to higher prices for energy and food, both of which moved up 1.6 percent. By contrast, prices for finished goods other than foods and energy declined 0.6 percent.

Finished energy:  The index for finished energy goods advanced 1.6 percent in October compared with a 2.4-percent drop in the previous month. Almost half of the increase can be traced to the gasoline index, which climbed 1.9 percent. Rising prices for residential electric power and liquefied petroleum gas also contributed to the advance in the finished energy goods index. (See table 2.)

Finished foods:  Finished consumer food prices rose 1.6 percent in October after edging down 0.1 percent a month earlier. Accounting for about half of the increase, the index for fresh and dry vegetables jumped 24.2 percent. Higher prices for fresh fruits and melons also contributed to the advance in the finished consumer foods index.

Finished core:  In October, the index for finished goods less foods and energy moved down 0.6 percent, its second consecutive decrease. Lower prices for light motor trucks and passenger cars led the October decline, falling 5.2 percent and 0.5 percent, respectively. In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October. (See Report on Quality Changes for 2010 Model Vehicles, USDL 09-1400.)

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components moved up 0.3 percent in October, its third straight monthly advance. The October rise can be traced to higher prices for intermediate energy goods, which climbed 2.3 percent. By contrast, the indexes for both intermediate goods less foods and energy and for intermediate foods and feeds decreased 0.2 percent. On a 12-month basis, prices for intermediate goods fell 7.5 percent in October. This is the third consecutive month of slowing year-over-year declines following a record 15.1-percent drop for the 12 months ended July 2009.  (See table B.)   

Intermediate energy:  The index for intermediate energy goods advanced 2.3 percent in October after falling 2.1 percent in September. About one-fifth of this increase can be traced to a 5.5-percent rise in diesel fuel prices. Higher prices for natural gas to electric utilities and commercial electric power also contributed to the advance in the intermediate energy goods index. (See table 2.)

Crude goods

The Producer Price Index for Crude Materials for Further Processing increased 5.4 percent in October after falling 2.1 percent in September. For the 3-month period ending in October, crude material prices rose 7.1 percent after advancing 4.1 percent in the 3 months ending in July. The monthly October rise was broad based, with prices for crude energy materials jumping 8.3 percent, the index for crude foodstuffs and feedstuffs moving up 5.2 percent, and prices for crude nonfood materials less energy increasing 0.5 percent. (See table B.)

Crude energy:  The index for crude energy materials increased 8.3 percent in October. From July to October, this index rose 9.5 percent, compared with an 11.8-percent rise in the 3 months ending in July. Accounting for about sixty percent of the monthly October increase, the natural gas index moved up 16.3 percent. Higher prices for both crude petroleum and coal also contributed to the advance in the crude energy materials index. (See table 2.)

Crude foods:  The index for crude foodstuffs and feedstuffs increased 5.2 percent in October.  This index moved up 2.4 percent in the most recent 3-month period compared with a 6.0-percent decline in the previous 3-month period. In October, a 9.0-percent rise in the grains index led the advance in the crude foodstuffs and feedstuffs index. Higher prices for slaughter poultry were also a factor in this increase.

Crude core:  The index for crude nonfood materials less energy rose 0.5 percent in October, and 10.4 percent for the 3 months ending in October. Similarly, for the 3 months ending in July, prices climbed 10.8 percent. A major contributor to the monthly October increase was the gold ores index, which rose 5.4 percent.