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Producer Prices Spike Again, Led by Energy, When Does It Stop?

Prices for goods jumped 2.4 percent in February, the largest advance since data were first calculated in December 2009.
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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 0.8 percent in February according to the Bureau of Labor Statistics (BLS).

Year-over-year the PPI is up 10.0 percent. Here's a breakdown of goods vs. services.

Final Demand Services

  • Prices for final demand services were unchanged in February after a 1.0-percent increase in January. 
  • In February, a 1.9-percent rise in the index for final demand transportation and warehousing services and a 0.2-percent advance in margins for final demand trade services offset a 0.4- percent decrease in the index for final demand services less trade, transportation, and warehousing
  • A major factor in the January increase in the index for final demand services was hospital outpatient care prices, which rose 1.6 percent.
  • Within the index for final demand services in February, prices for truck transportation of freight moved up 2.0 percent. 
  • The indexes for food and alcohol retailing, machinery and vehicle wholesaling, transportation of passengers (partial), and outpatient care (partial) also rose. 
  • Conversely, prices for portfolio management decreased 4.2 percent. 
  • The indexes for guestroom rental; apparel, jewelry, footwear, and accessories retailing; automobile retailing (partial); and residential real estate loans (partial) also declined.

Final Demand Goods

  • Prices for final demand goods jumped 2.4 percent in February, the largest advance since data were first calculated in December 2009. 
  • Two-thirds of the broad-based increase can be traced to an 8.2-percent rise in the index for final demand energy. 
  • Prices for final demand goods less foods and energy and for final demand foods also moved higher, 0.7 percent and 1.9 percent, respectively.
  • Nearly 40 percent of the February increase in prices for final demand goods can be attributed to the index for gasoline, which rose 14.8 percent. 
  • Prices for diesel fuel, electric power, jet fuel, motor vehicles and equipment, and dairy products also advanced. 
  • In contrast, the index for fresh and dry vegetables decreased 9.4 percent. Prices for beef and veal and for hot rolled steel sheet and strip also moved lower.

PPI Final and Intermediate Demand vs CPI

PPI Final, Intermediate, and CPI Data from BLS, chart by Mish

PPI Final, Intermediate, and CPI Data from BLS, chart by Mish

Processed Goods for Intermediate Demand

  • The index for processed goods for intermediate demand increased 1.6 percent in February after climbing 2.0 percent in January. 
  • Leading the broad-based advance in February, prices for processed energy goods rose 7.4 percent.
  • The indexes for processed foods and feeds and for processed materials less foods and energy moved up 1.9 percent and 0.1 percent, respectively.
  • For the 12 months ended in February, prices for processed goods for intermediate demand jumped 23.3 percent. 
  • Over 40 percent of the February increase in prices for processed goods for intermediate demand can be attributed to a 14.9-percent rise in the index for diesel fuel. 
  • Prices for gasoline, primary basic organic chemicals, commercial electric power, nonferrous metals, and prepared animal feeds also advanced. 
  • In contrast, the index for hot rolled steel sheet and strip fell 16.0 percent. Prices for natural gas to electric utilities and for beef and veal also declined.

Unprocessed Goods for Intermediate Demand

  • Prices for unprocessed goods for intermediate demand moved up 14.6 percent in February, the largest increase since rising 17.4 percent in January 2001. 
  • Ninety percent of the broad-based advance in February can be traced to a 32.3-percent jump in the index for unprocessed energy materials. 
  • Prices for unprocessed foodstuffs and feedstuffs and for unprocessed nonfood materials less energy also moved higher, 3.0 percent and 1.4 percent, respectively. 
  • For the 12 months ended in February, the index for unprocessed goods for intermediate demand climbed 35.1 percent. 
  • Over two-thirds of the February advance in prices for unprocessed goods for intermediate demand can be attributed to a 65.1-percent jump in the index for natural gas. 
  • Prices for crude petroleum; slaughter hogs; hay, hayseeds, and oilseeds; nonferrous scrap; and slaughter cattle also increased. 
  • Conversely, the index for raw milk decreased 8.7 percent. Prices for carbon steel scrap and for nonferrous metal ores also moved lower.

PPI Final Demand Year-Over-Year Four Ways

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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: +10.0%
  • Final Demand Goods: +13.4%
  • Final Demand Services: +8.1%
  • Final Demand Energy: +30.7%

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.

PPI Year-Over-Year Has Peaked

The year-over-year comparisons start getting extremely difficult to beat starting in March.

Moreover, services which weigh almost 65% of the PPI have stalled.

This indicates that year-over-year numbers have either peaked this month or soon will. 

This post originated at MishTalk.Com.

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