The Bureau of Labor Statistics released its the Producer Price Index (PPI) data this morning, showing that overall prices for finished goods rose 0.7 percent in March. Excluding food and energy costs, finished goods rose 0.2 percent.
Within manufacturing, the PPI was up 2.2 percent for the month and 7.7 percent from last year. Industries with the greatest gains in producer prices in March include petroleum and coal products manufacturing, primary metal manufacturing, textile mills, and food manufacturing.
While the PPI increase was less than in February, the overall trend shows a steady increase since early 2009 (see the accompanying picture), potentially squeezing profits for those firms which are unable to pass those higher costs along to the consumer. One of the largest drivers of this increase has been higher energy costs, which rose 2.6 percent in March.
The picture for intermediate goods is mostly the same, spurred on by higher energy costs. The PPI for intermediate materials, supplies, and components was up 1.5 percent, with the core PPI (which excludes food and energy) increasing 0.9 percent. Processed fuels and lubricants costs saw the highest increase month-to-month, jumping 4.2 percent for manufacturing industries. Materials and components for construction and overall supplies for manufacturers rose 0.8 percent for the month. In terms of crude materials for further processing, however, crude fuel costs actually fell for the month. For manufacturers, crude fuel prices fell 4.3 percent, reflecting some volatility.
In summary, producer prices are rising, continuing a trend that we have seen for much of the past two years, and much of that increase is due to higher energy costs, with the overall “core” PPI increasing moderately.
Chad Moutray is chief economist at the National Association of Manufacturers.