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Producer Prices Rise Another 1.0% in January, What's Going On?

Producer prices jumped again in January with goods up 1.3% and services up 0.7%.
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Produce Price Data from BLS, chart by Mish

Produce Price Data from BLS, chart by Mish

The Producer Price Index jumped another percent in January according to the Bureau of Labor Statistics (BLS).

Final Demand Services

  • Prices for final demand services advanced 0.7 percent in January, the same as in December. Three-fourths of the rise in January can be traced to a 0.9-percent increase in the index for final demand services less trade, transportation, and warehousing. Likewise, margins for final demand trade services moved up 0.6 percent.
  • A major factor in the January increase in the index for final demand services was hospital outpatient care prices, which rose 1.6 percent. 
  • The indexes for machinery and vehicle wholesaling; apparel, jewelry, footwear, and accessories retailing; traveler accommodation services; portfolio management; and truck transportation of freight also moved higher. 
  • Margins for fuels and lubricants retailing fell 9.7 percent. The indexes for transportation of passengers (partial) and for physician care also decreased. 

Final Demand Goods

  • Prices for final demand goods advanced 1.3 percent in January after declining 0.1 percent in December. 
  • Over 40 percent of the broad-based increase can be traced to a 0.8-percent rise in the index for final demand goods less foods and energy. 
  • Prices for final demand energy and for final demand foods also moved higher, 2.5 percent and 1.6 percent, respectively. 
  • Within the final demand goods category in January, the index for motor vehicles and equipment rose 0.7 percent. Prices for diesel fuel, gasoline, beef and veal, dairy products, and jet fuel also increased.
  • The index for iron and steel scrap decreased 10.7 percent. Prices for unprocessed finfish and for natural gas also moved lower. 
PPI Final and Intermediate Data from BLS, chart by Mish

PPI Final and Intermediate Data from BLS, chart by Mish

Processed Goods for Intermediate Demand

  • The index for processed goods for intermediate demand rose 1.7 percent in January after declining 0.1 percent in December. 
  • Over half of the broad-based increase in January can be traced to prices for processed materials less foods and energy, which advanced 1.2 percent. 
  • The indexes for processed energy goods and for processed foods and feeds climbed 3.4 percent and 2.4 percent, respectively. 
  • For the 12 months ended in January, prices for processed goods for intermediate demand jumped 24.1 percent. 
  • In January, a 25.4-percent increase in the index for softwood lumber was a major contributor to the rise in prices for processed goods for intermediate demand.
  • The indexes for diesel fuel, nonferrous metals, electric power, metal containers, and dairy products also moved higher.
  • Prices for hot rolled steel sheet and strip decreased 6.4 percent. The indexes for natural gas to electric utilities and for pork also fell.

Unprocessed Goods for Intermediate Demand

  • The index for unprocessed goods for intermediate demand declined 2.0 percent in January after falling 4.8 percent in December. 
  • Most of the January decrease is attributable to prices for unprocessed energy materials, which dropped 4.7 percent. 
  • The index for unprocessed foodstuffs and feedstuffs moved down 0.7 percent. In contrast, prices for unprocessed nonfood materials less energy edged up 0.1 percent. 
  • For the 12 months ended in January, the index for unprocessed goods for intermediate demand increased 29.7 percent. 
  • Leading the January decline in the index for unprocessed goods for intermediate demand, natural gas prices dropped 26.1 percent. The indexes for iron and steel scrap, raw milk, slaughter hogs, unprocessed finfish, and slaughter cattle also moved lower. 
  • Prices for nonferrous metal ores rose 6.5 percent. The indexes for crude petroleum and for hay, hayseeds, and oilseeds also increased. 
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PPI Final Demand Year-Over-Year Plus Energy 

Final Demand Goods, Services, Energy data from BLS, chart by Mish

Final Demand Goods, Services, Energy data from BLS, chart by Mish

Final Demand Goods, Services, Energy Year-Over-Year Details 

  • Final Demand: +9.7%
  • Final Demand Goods: +13.1%
  • Final Demand Services: +7.7%
  • Final Demand Energy: +28.8%

The BLS weighs services at 64.964% of final demand, and goods at 33.284% of final demand.

Of the 33.284% weight for goods, energy accounts for only 5.998 percentage points.

This post originated at MishTalk.Com.

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