PPI for Goods and Services Diverge

The Producer Price Index for final demand advanced 0.1 percent in June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. In June, the rise in final demand prices is attributable to a 0.4-percent increase in the index for final demand services. Conversely, prices for final demand goods fell 0.4 percent.

Final Demand Goods

• Prices for final demand goods moved down 0.4 percent in June, the largest decrease since falling 0.6 percent in January. The June decline is attributable to a 3.1-percent drop in the index for final demand energy. Conversely, prices for final demand foods climbed 0.6 percent.
• The index for final demand goods less foods and energy was unchanged.
• Product detail: Nearly 60 percent of the June decrease in the index for final demand goods can be traced to a 5.0-percent decline in prices for gasoline. The indexes for diesel fuel, meats, liquefied petroleum gas, iron and steel scrap, and residual fuels also moved lower. In contrast, corn prices rose 19.9 percent. The indexes for ethanol and residential electric power also increased.

Final Demand Services

• The index for final demand services rose 0.4 percent in June, the largest increase since climbing 0.8 percent in October 2018. Most of the June advance is attributable to margins for final demand trade services, which moved up 1.3 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)
• Prices for final demand transportation and warehousing services rose 0.3 percent, while the index for final demand services less trade, transportation, and warehousing was unchanged.
• Product detail: Over a quarter of the June increase in prices for final demand services can be traced to margins for fuels and lubricants retailing, which jumped 12.2 percent. The indexes for health, beauty, and optical goods retailing; apparel, footwear, and accessories retailing; machinery, equipment, parts, and supplies wholesaling; loan services (partial); and truck transportation of freight also moved higher. In contrast, prices for traveler accommodation services fell 4.0 percent. The indexes for jewelry retailing and airline passenger services also declined.

Mike “Mish” Shedlock